Optional (exemptions from application of other Ind AS)
Business combination: Ind AS 103 need not be applied to combinations before date of transition. But, if one combination is restated, all subsequent combinations are restated. When the exemption is used: *There won’t be any change in classification. *Assets and liabilities of past combination measured at carrying amount (deemed cost). *Assets and liabilities measured at fair value restated at date of transition- adjusted retained earnings. Note: If an asset acquired, or liability assumed, in a past business combination was not recognized in accordance with previous GAAP, it does not have a deemed cost of zero in the opening Ind AS Balance Sheet. Instead, the acquirer shall recognize and measure it in its Consolidated Balance Sheet on the basis that Ind AS would be required in the Balance Sheet of the acquiree.
Insurance contracts: Ind AS 104 will apply for annual periods beginning on or after date of transition to Ind AS. If an insurer changes its accounting policies for insurance liabilities, it is permitted to reclassify some or all of its financial assets as FVTPL (fair value through profit or loss).
Share based payment transactions: Apply Ind AS 102, Share-based Payment, to equity instruments that vested before date of transition to Ind AS. However, a first-time adopter may apply Ind AS 102 to equity instruments, if it has disclosed publicly the fair value of those equity instruments, determined at the measurement date. It is encouraged to apply Ind AS 102 to liabilities arising from share-based payment transactions that were settled before the date of transition to Ind AS.
Deemed cost for PPE and intangible assets: If an entity uses fair value in its opening Ind AS Balance Sheet as deemed cost for an item of property, plant and equipment, an intangible asset or a right-of-use asset, the entity’s first Ind AS financial statements shall disclose, for each line item in the opening Ind AS Balance Sheet: The aggregate of those fair values; and The aggregate adjustment to the carrying amounts reported under previous GAAP. A first-time adopter may elect to use a previous GAAP revaluation of an item of property, plant and equipment at, or before, the date of transition to Ind AS as deemed cost at the date of the revaluation, if the revaluation was, at the date of the revaluation, broadly comparable to: fair value; or cost or depreciated cost in accordance with Ind AS, adjusted to reflect, for example, changes in a general or specific price index. For Investment Property: Ind AS 40, Investment Property permits only the cost model. Therefore, option of availing fair value as deemed cost for investment property is not available for first time adopters of Ind AS for its financial statements.
Cumulative translation difference: No need to: Recognize some translation differences in other comprehensive income. Reclassify cumulative translation differences for foreign operation from entity to profit or loss as part of gain or loss on its disposal. If first time adopter uses this exemption: Cumulative translation differences set to zero for all foreign operations. Gain/ loss on subsequent disposal of a foreign operation shall exclude these differences that arose before transition. A first time adopter may continue the policy adopted for accounting for exchange differences arising from long term monetary foreign currency items, as per previous GAAP.
Investment in subsidiaries, joint ventures and associates: It is measured at cost, the cost may be : Cost determined in accordance with Ind AS 27 or Deemed cost (which may be fair value or previous GAAP carrying amount).
Compound financial instruments: A first time adopter need not split the compound financial instruments into separate liability and equity component, if liability component is not outstanding as at transition date.
Fair value measurement of financial assets or financial liabilities: An entity may apply requirement of Ind AS 109 prospectively to transactions entered into on or after the date of transition.
Decommissioning liabilities included in Property Plant Equipment: An entity need not comply with the requirement for changes in such liabilities that accounted before the date of transition. However, entity may measure liability as at the transition date as per Ind AS 37 and recognize its effect.
Designation of previously recognized financial instruments: An entity may designate any financial liability or asset at fair value through profit or loss at transition date. Investment in equity may be designated at fair value through other comprehensive income at transition date. If retrospectively application of effective interest method or impairment requirement is impracticable – fair value shall be new amortised cost of financial asset on the date of transition.
Existing financial liabilities with equity instruments: A first time adopter may apply Ind AS 109 from the date of transition to Ind AS.
Severe Hyperinflation: In hyper-inflationary economy, when an entity’s date of transition to Ind AS, is on, or after, the functional currency normalization date, then all assets and liabilities held before the functional currency normalization date may be measured at fair value on the date of transition. This fair value may be used as deemed cost of those assets and liabilities in the opening Ind AS statement of financial position.
Leases: A first time adopter may determine whether an arrangement existing at the date of transition to Ind AS contain a lease (including classification of each land and building element as finance or an operating lease) on the basis of facts and circumstances existing on the date of transition.
A lessee which is a first-time adopter of Ind AS shall recognize lease liabilities and right-of-use assets, by applying the following approach to all of its leases at the date of transition to Ind AS: (a) measure a lease liability at the present value of the remaining lease payments discounted using the lessee’s incremental borrowing rate at the date of transition to Ind AS; (b) measure a right-of-use asset on a lease-by-lease basis either at: its carrying amount as if Ind AS 116 had been applied since the commencement date of the lease, but discounted using the lessee’s incremental borrowing rate at the date of transition to Ind AS; or an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the Balance Sheet immediately before the date of transition to Ind AS. (c) apply Ind AS 36 to right-of-use assets.
A first-time adopter that is a lessee may do one or more of the following at the date of transition to Ind AS, applied on a lease-by lease basis: 1. apply a single discount rate to a portfolio of leases with reasonably similar characteristics. 2. elect not to apply the above requirements given in (a) to (c) to leases for which the lease term ends within 12 months of the date of transition to Ind AS. Instead, the entity shall account for (including disclosure of information about) these leases as if they were short-term leases accounted as per Ind AS 116. 3. elect not to apply the above requirements given in (a) to (c) to leases for which the underlying asset is of low value. Instead, the entity shall account for (including disclosure of information about) these leases as per Ind AS 116. 4. exclude initial direct costs from the measurement of the right-of-use asset at the date of transition to Ind AS. 5. Use hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease.
