Page 14 - 1. COMPILER QB - INDAS 1

AS 1 is required to be given in the notes.
(b) As discussed in point (a) above, advances to suppliers for goods and services would be classified in
accordance with normal operating cycle if it is given in relation to the goods or services in which the

entity normally deals. If the advances are considered a part the normal operating cycle, it would be
classified as a current asset. If the operating cycle exceeds twelve months, then additional disclosure as
required by paragraph 61 of Ind AS 1 is required to be given in the notes.
(c) Classification of income tax receivables [other than deferred tax] will be driven by paragraph 66 (c) of
Ind AS 1, i.e., based on the expectation of the entity to realise the asset. If the receivable is expected to

be realised within twelve months after the reporting period, then it will be classified as current asset else
non-current asset.
(d) Para 8 of Ind AS 16 states that items such as spare parts, stand-by equipment and servicing equipment
are recognised in accordance with this Ind AS when they meet the definition of property, plant and
equipment. Otherwise, such items are classified as inventory.

Accordingly, the insurance spares that are treated as an item of property, plant and equipment would
normally be classified as non-current asset whereas insurance spares that are treated as inventory will be
classified as current asset if the entity expects to consume it in its normal operating cycle.

Q6 (May 21)

HIM Limited having net worth of Rs.250 crores is required to adopt Ind AS from 1 April, 20X2 in accordance
with the Companies (Indian Accounting Standard) Rules 2015.
Rahul, the senior manager, of HIM Ltd. has identified following issues which need specific attention of CFO so
that opening Ind AS balance sheet as on the date of transition can be prepared:

Issue 1: As part of Property, Plant and Equipment, Company has elected to measure land at its fair value and
want to use this fair value as deemed cost on the date of transition. The carrying value of land as on the
date of transition was Rs. 5,00,000. The land was acquired for a consideration of Rs. 5,00,000. However, the
fair value of land as on the date of transition was Rs. 8,00,000.

Issue 2: Under Ind AS, the Company has designated mutual funds as investments at fair value through profit
or loss. The value of mutual funds as per previous GAAP was Rs.4,00,000 (at cost). However, the fair value of
mutual funds as on the date of transition was Rs.5,00,000.

Issue 3: Company had taken a loan from another entity. The loan carries an interest rate of 7% and it had

incurred certain transaction costs while obtaining the same. It was carried at cost on its initial recognition.
The principal amount is to be repaid in equal instalments over the period of loan. Interest is also payable at
each year end. The fair value of loan as on the date of transition is Rs. 1,80,000 as against the carrying
amount of loan which at present equals Rs. 2,00,000.

Issue 4: The company has declared dividend of Rs. 30,000 for last financial year. On the date of transition,
the declared dividend has already been deducted by the accountant from the company’s ‘Reserves & Surplus’
and the dividend payable has been grouped under ‘Provisions’. The dividend was only declared by board of
directors at that time and it was not approved in the annual general meeting of shareholders. However,
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