Page 9 - 32. ANALYSIS OF FS

Q3 (RTP 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 installments 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 a 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 the board of
directors at that time and it was not approved in the annual general meeting of shareholders. However,
subsequently when the meeting was held it was ratified by the shareholders.

Issue 5: The company had acquired intangible assets as trademarks amounting to Rs. 2,50,000. The company

is assumed to have indefinite life of these assets. The fair value of the intangible assets as on the date of
transition was Rs. 3,00,000. However, the company wants to carry the intangible assets at Rs. 2,50,000 only.

Issue 6: After consideration of possible effects as per Ind AS, the deferred tax impact is computed as Rs.
25,000. This amount will further increase the portion of deferred tax liability. There is no requirement to carry
out the separate calculation of deferred tax on account of Ind AS adjustment.

Management wants to know the impact of Ind AS in the financial statements of the company for its general
understanding. Prepare Ind AS Impact Analysis Report (Extract) for HIM Limited for presentation to the
management wherein you are required to discuss the corresponding differences between Earlier IGAAP (AS)
and Ind AS against each identified issue for preparation of transition date balance sheet. Also pass journal

entries for each issue.

32.8