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

Veda Textiles Ltd, an Indian company, has prepared its financial statements under the notified Accounting Standards (Indian GAAP) for reporting in India. It also prepared a separate set of statements under US GAAP for its foreign parent. It now adopts Ind AS for the first time. Under Ind AS 101, which basis should Veda Textiles treat as its 'previous GAAP'?

Veda Textiles must treat the notified Accounting Standards it used for its reporting requirement in India as its previous GAAP. Ind AS 101 defines previous GAAP by reference to Indian reporting requirements, so the US GAAP statements prepared for the foreign parent are ignored.

  1. AThe US GAAP statements, because they were prepared on the most recent comprehensive basis
  2. BThe notified Accounting Standards used for its reporting requirement in India immediately before adopting Ind ASCorrect
  3. CWhichever of the two sets showed the higher net worth at the transition date
  4. DEither of the two sets, at the option of the management

Explanation

Ind AS 101 defines previous GAAP as the basis of accounting used for the entity's reporting requirement in India immediately before adopting Ind AS. This makes the notified Indian accounting standards the previous GAAP. The US GAAP set was prepared for the parent abroad and is therefore not the previous GAAP.

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