Page 16 - 30. COMPILER QB - IND AS 101

Rs.1,00,000 The Company had a non-integral foreign branch in accordance with AS 11 and had recognised a
balance of Rs. 1,00,000 as part of reserves. On first-time adoption of Ind AS, the Company intends to avail
Ind AS 101 exemption of resetting the cumulative translation difference to zero.

SOLUTION
1. Property, plant and equipment: As the land held for capital appreciation purposes qualifies as investment

property, such investment property should be reclassified from property, plant and equipment (PPE) to
investment property and presented separately. As the Company has adopted the previous GAAP carrying
values as deemed cost, all items of PPE and investment property should be carried at its previous GAAP
carrying values. As such, the past capitalised exchange differences require no adjustment in this case.
2. Investment in subsidiary: On first time adoption of Ind AS, a parent company has an option to carry its

investment in the subsidiary at fair value as at the date of transition in its separate financial statements.
As such, the company can recognise such investment at a value of Rs. 68,00,000.
3. Financial instruments: As the deferral loan is a financial liability under Ind AS 109, that liability should
be recognised at its present value discounted at an appropriate discounting factor. Consequently, the
deferral loan should be recognised at Rs. 37,25,528 and the remaining Rs. 22,74,472 would be recognised
as deferred government grant.

4. ESOPs: Ind AS 101 provides an exemption of not restating the accounting as per the previous GAAP in
accordance with Ind AS 102 for all options that have vested by the transition date. Accordingly, out of
1000 ESOPs granted, the first-time adoption exemption is available on 800 options that have already
vested. As such, its accounting need not be restated. However, the 200 options that are not vested as at

the transition date, need to be restated in accordance with Ind AS 102. As such, the additional impact of
Rs. 1,000 (i.e., 9,000 less 8,000) would be recognised in the opening Ind AS balance sheet.
5. Cumulative translation difference: As per Ind AS 101, the first-time adopter can avail an
exemption regarding requirements of Ind AS 21 in context of cumulative translation differences. If

a first-time adopter uses this exemption the cumulative translation differences for all foreign
operations are deemed to be zero as at the transition date. In that case, the balance is

transferred to retained earnings. As such, the balance of Rs. 1,00,000 should be transferred to
retained earnings.
6. Retained earnings should be increased by Rs. 20,99,000 on account of the following:

Rs.
Increase in fair value of investment in subsidiary (note 2) 20,00,000
Additional ESOP charge on unvested options (note 4) (1,000)
Transfer of cumulative translation difference balance to retained
earnings (note 5) 1,00,000
Increase in Retained Earnings 20,99,000
After the above adjustments, the carrying values of assets and liabilities for the purpose of opening Ind AS
balance sheet of Company H should be as under:
Particular Notes Previous Adjustments Ind AS GAAP

Non-Current Assets
Property, plant and equipment 1 1,34,50,000 (4,50,000) 1,30,00,000
Investment property 1 0 4,50,000 4,50,000
Investment in S Ltd. 2 48,00,000 20,00,000 68,00,000
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