Skip to content

CA Final · Financial Reporting · Ind AS 101 First-time Adoption of Ind AS

Kaveri Pharma Ltd adopts Ind AS for the first time. Under previous GAAP it had recognised a deferred cost that does not qualify as an asset under Ind AS. In a separate item, an earlier business combination required eliminating an asset that would normally be adjusted against goodwill under IFRS 1. As per Ind AS 101, how may such an adjustment against goodwill be made?

Under Ind AS 101, where IFRS 1 would permit an adjustment to goodwill, the adjustment is made against Capital reserve, but only to the extent it does not exceed the balance available in Capital reserve. It cannot create a debit balance or be charged to profit or loss.

  1. AIt may be adjusted against Capital reserve, to the extent it does not exceed the balance available in Capital reserveCorrect
  2. BIt may be adjusted against Capital reserve without any limit, even creating a debit balance
  3. CIt must always be charged to the statement of profit and loss of the first Ind AS period
  4. DIt must be adjusted against Securities premium only

Explanation

Ind AS 101 differs from IFRS 1: where IFRS 1 allows adjustment to goodwill, Ind AS 101 allows adjustment against Capital reserve, but only up to the balance available in Capital reserve. So an unlimited adjustment creating a debit balance is not permitted. Charging to profit or loss or Securities premium is not what the standard prescribes.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 101 First-time Adoption of Ind AS shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 101 First-time Adoption of Ind ASFree diagnostic mock

More Ind AS 101 First-time Adoption of Ind AS questions