Page 10 - 32. ANALYSIS OF FS

SOLUTION

1. Preliminary Impact Assessment on Transition to Transition to Ind AS in HIM Limited’s Financial
Statements

Issue 1: Fair value as deemed cost for property plant and equipment:
Accounting Standards Ind AS Impact on Company’s financial
(Erstwhile IGAAP) statements
As per AS 10, Property, Plant Ind AS 101 allows an entity The company has decided to adopt
and Equipment is recognised to elect to measure fair value as deemed cost in this
at cost less depreciation property, Plant and case. Since fair value exceeds book
Equipment on the value, the book value should be
transition date at its fair brought up to fair value. The
value or previous GAAP resulting impact of fair valuation of
carrying value (book value) land Rs.3,00,000 should be adjusted
as deemed cost. in other equity

Journal Entry on the date of transition
Particulars Debits (Rs.) Credit (Rs.)
Property Plant and Equipment Dr. 3,00,000
To Revaluation Surplus (OCI- Other Equity) 3,00,000

Issue 2: Fair valuation of Financial Assets
Accounting Standards Ind AS Impact on company’s financial statements
(Erstwhile IGAAP)
As per Accounting Standard, On transition, financial All financial assets (other than in subsidiaries,
investments are measured at assets include associates and JVs’ which are recorded at cost)
lower cost and fair value. investments measured at are initially recognized at fair value.
fair values except for The subsequent measurement of such assets
investments in are based on its categorization either Fair Value
subsidiaries, associates through Profit & Loss (FVTOCI) or at business
and JVs’ which are model assessment and contractual cash flow.
recorded at cost. Since investments in mutual funds are
designated at FVTPL, an increase of Rs.1,00,000
in mutual funds fair value would increase the
value of investments with corresponding
increase to Retained Earnings.

Journal Entry on the date of transition
Particulars Debits (Rs.) Credit (Rs.)
Investment in mutual funds Dr. 1,00,000
To Retained earnings 1,00,000

32.9