The Companies Act, 2013 required the preparation of financial statements of specified companies following IND AS. For this purpose, the Ministry of Corporate Affairs (MCA) had constituted a layout that guided the adoption of IND AS by the defined companies in a stage manner. IND AS 101 provides the basis for transition and disclosures to be made in the financial statements by a first time adopter. Therefore, IND AS 101 provides an appropriate initial point for entities shifting to IND AS. IND AS 101 is applied by entities in its first IND AS financial statements.
Purpose of standard
The purpose of this standard is to certify that the company’s first IND AS financial statements and interim statements contain transparent and comparable information, the cost does not exceed the benefits, and the statements provide an appropriate starting point for accounting following Indian Accounting Standard.
Which statement does this standard claim to?
This standard pertains to the first IND AS financial statements and each interim financial report if any. But this standard does not claim to changes in accounting policies for an organization that already uses IND AS; such changes are subject to requirements of IND AS 8 or specific transitional requirements of other IND AS:
- Implementation of IND AS
- Selection of accounting policies
- Preparation of opening IND AS balance sheet
- Presentation and disclosure in an entity’s in IND AS financial statements and interim financial reports
- An entity must use the same accounting policies in its opening balance sheet of IND AS and throughout all periods presented in its first IND AS financial statements.
- Accounting policies are essential to be selected from Ind AS essential at the end of its first IND AS reporting period, except there is a specific exemption or option provided in IND AS 101.
- An entity is required to take the ensuing necessary steps in its opening IND AS balance sheet:
- Recognize all assets and liabilities whose realization is required by IND AS.
- Not recognize items as assets or liabilities if IND AS do not grant such realization
- Reclassify items that it recognized following previous generally accepted accounting principles (GAAP) as one type of asset, liability, or component of owner’s equity, but are a different type of asset, liability, or component of owner’s equity in line with IND AS, and
- Apply IND AS in estimating all recognized assets and liabilities.
- The accounting policies in the opening IND AS balance sheet may vary from those that an entity used for the same date under preceding generally accepted accounting principles (GAAP). The resulting arrangements from events and transactions before the transition to IND AS are typically recognized in retained earnings.
- IND AS 101 set up the following two categories of deviations to the principle that an entity’s opening IND AS balance sheet should comply with each IND AS:
- Forbids retrospective application of some specific aspects of an IND AS
- Permits exemptions from some particular requirements of an IND AS.
Explanation of transition to IND AS
An entity is required to describe how the transition from previous generally accepted accounting principles (GAAP) to IND AS contrived its reported balance sheet, statement of operations, and cash flows.
Detailed disclosures on the first-time adoption of IND AS, along with reconciliations of owner’s equity and profit or loss from previous generally accepted accounting principles (GAAP) to IND AS, are required in the annual financial statements and some disclosures in its interim financial information.
At AJSH, we assist our clients in bookkeeping, payroll, auditing, taxation, secretarial compliances and preparation of financial statements ensuring compliances with applicable standards. If you have any questions or wish to know more about IND AS 101, kindly contact us.