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

Kaveri Pharma Ltd is a first-time adopter of Ind AS. Under its previous GAAP it recognised an item as an asset that does not qualify as an asset under Ind AS. Which statement about the opening Ind AS balance sheet is correct?

The item is excluded from the opening Ind AS balance sheet, and the resulting change is accounted for in retained earnings at the transition date, except in specific cases where goodwill is adjusted. It is not carried forward or run through first-year profit.

  1. AThe item is retained and amortised over the next five years
  2. BThe item is excluded from the opening Ind AS balance sheet, and the resulting change is generally adjusted in retained earnings at the transition dateCorrect
  3. CThe item is excluded and the change is always taken to profit or loss of the first Ind AS year
  4. DThe item is moved to other comprehensive income permanently

Explanation

A first-time adopter excludes from its opening Ind AS balance sheet any item recognised under previous GAAP that does not qualify as an asset or liability under Ind AS. The resulting change is accounted for in retained earnings at the transition date, except in specific instances requiring a goodwill adjustment. Taking it to first-year profit is wrong because the adjustment relates to the transition date.

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