Exemptions in Ind AS 101 - First time adaption of Ind AS - Decoded

IFRS converged Ind AS has hit the door as many companies are preparing their comparatives under Ind AS for June 2016, which is June 2015 as well as March 2015 for Opening figures.

Optional Exemptions

Currently, Ind AS 101, has 20 optional exemption from retrospective application and the same has been categorized based on its importance and impact on financial statement  which are as follows


Significant Impact

  • Deemed cost - Property plant and equipment, Investment property and Intangible assets
  • Cumulative translation differences
  • Business Combination

Medium Impact

  • Share-based payment
  • Leases
  • Investments in subsidiaries, joint ventures and associates
  • Assets and liabilities of subsidiaries, associates and joint ventures
  • Compound financial instruments`
  • Designation of previously recognised financial instruments
  • FV measurement of financial assets or financial liabilities at initial recognition
  • Decommissioning liabilities

Low Impact

  • Insurance contracts
  • Financial assets or intangible assets accounted for in accordance with Appendix C to Ind AS 115
  • Extinguishing financial liabilities with equity instruments
  • Severe hyperinflation
  • Joint arrangements
  • Stripping costs
  • Designation of contracts to buy or sell a non-financial item
  • Revenue from contracts with customers
  • Non-current assets held for sale and discontinued operations

Significant Impacts : Discussion

Deemed cost - Property plant and equipment, Investment property and Intangible assets:

In case of Property, plant and equipment, Investment property and Intangible assets, a company can choose to measure the value using:
  • Cost in accordance with Ind AS; or
  • Fair value at the date of transition as deemed cost; or
  • A revaluation carried out at a previous date (like a IPO) less accumulated
  • depreciation till the date of transition; or
  • Book value (carrying value) of assets recorded in Indian GAAP as on the date of transaction.
In simple words, Companies have option to use the existing book values (carrying value) of fixed assets in their first Ind AS financial statement without requiring it to reopen past adjustments such as i.e. capitalisation of borrowing cost, treatment of foreign exchange gains / losses, capitalisation of indirect expenses etc.

Cumulative translation differences:

If a first time adopter uses this exemption:
  • The cumulative translation differences for all foreign operations are deemed to be zero at the date of transition to Ind ASs; and
  • The gain or loss on a subsequent disposal of any foreign operation shall exclude translation differences that arose before the date of transition to Ind AS and shall include later translation differences.
Accordingly, all cumulative translation gains and losses arising from foreign operations as of the date of transition to Ind AS are reset to zero.

Business Combination

For all transactions qualifying as business combinations under Ind AS 103, a company can choose to: 
Not restate business combinations before the date of transition.
Restate all business combinations before the date of transition.
Restate a particular business combination, in which case all subsequent business combinations must also be restated and the Ind AS 36 impairment guidance must be applied.

Mandatory Exception – Significant

There are several mandatory exceptions to full retrospective application of Ind AS. Based on its importance it has been categorized in the following table:

Significant Impact

  • Estimates

Medium Impact

  • Derecognition of financial assets and financial liabilities
  • Hedge Accounting

Low Impact

  • Non-controlling interest
  • Classification and measurement of
  • financial assets
  • Impairment of financial assets
  • Embedded derivatives
  • Government Loans

Significant Impact


In accordance with Ind AS 101, an entity’s estimates under Ind AS at the date of transition to Ind AS must be consistent with estimates made for the same date under Indian GAAP, unless there is objective evidence that those estimates were in error.

For example -
An entity makes provision for warranty @ 5% of total revenue based on historical trend for the year 2014-15. In 2015-16, the company came to know that products manufactured by it from a new factory in 2014-15 had a design defect and due to that the warranty costs will rise substantially for sales of the products manufactured in the new factory. Whether the company can revise its estimates of warranty cost while preparing its first Ind AS financials?

As per Ind AS 101, hindsight cannot be used either at the date of transition (i.e. April 1, 2014) or at any point during the comparative period (i.e. 2014-15), including the end of the comparative year. Accordingly, the company will not revise its estimates of warranty cost in its first Ind AS financials (i.e. transition date and comparative period).

Now as you have basic idea of Ind AS 101, do write to us for your queries ifrs@cavivek.in