ITFG clarifications explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A company adopting Ind AS for the first time opens its accounts at the date of transition and may use the deemed cost exemption in paragraph D7AA of Ind AS 101 to carry its previous GAAP property, plant and equipment forward. ITFG answered many questions on how far that exemption reaches. This digest sets them out in our own words and checks each against the text of Ind AS 101 as it now reads.
ITFG clarifications are the views of ICAI's Ind AS Technical Facilitation Group as on the date of each bulletin; they are not standards. On Ind AS 101 they say that the opening balance sheet is struck at the start of the first day of the date of transition, that paragraph D7AA applies to all property, plant and equipment (including capital work-in-progress and assets presented as held for sale) or to none, and that consequential adjustments that other Ind AS require, such as for processing fees on loans, are not adjustments to deemed cost. The two government grant issues are left out because the paragraph they rely on has changed.
Ind AS as on 1 April 2025 (ICAI Compendium of Ind AS 2025-26, the standards notified under the Companies (Indian Accounting Standards) Rules, 2015). Amendments notified after 1 April 2025 are not reflected in this article and should be checked on mca.gov.in. Opening-balance-sheet work of this kind is a core part of financial statement preparation in the year of transition.
How to read the table
Each issue is cited by bulletin and issue as printed at the end of the answer; the compendium numbers them differently. The last column says whether the Ind AS 101 paragraph the answer relies on reads the same in the compendium text. For the exemption itself, see our guides to first-time adoption and to deemed cost under Ind AS 101.
Digest
| Situation | ITFG's view | Reference | Paragraph relied on; still the same? |
|---|---|---|---|
| Is the opening balance sheet struck at the start or the end of the date of transition? | At the start of business on that date, which is the same as the close of business on the previous day | ITFG Clarification Bulletin 8, Issue 3 | Ind AS 101, paragraphs 6 and 8: reads the same |
| A company using previous GAAP carrying values as deemed cost: must it adjust for other Ind AS? | No further adjustment, except a consequential one that exists only because of a transition requirement | Bulletin 12, Issue 10 | Paragraphs 10, 11 and D7AA: reads the same |
| From which date is the functional currency assessed? | Retrospectively, because no exception or exemption covers it | Bulletin 1, Issue 5 | Paragraph 10: reads the same |
| Balance in the revaluation reserve when previous GAAP cost is carried and the cost model follows | Transfer to retained earnings or another equity category, with a description of its nature; deferred tax is recognised on the revalued asset's gap to its tax base; dividend questions go to the Companies Act | Bulletin 8, Issue 7 | Paragraph 11; Ind AS 1, paragraph 79(b); Ind AS 12: reads the same |
| Financial instruments taken over in a business combination not restated on transition | Previous GAAP carrying amount at the date of the combination is deemed cost; measurement under Ind AS 109 runs from that date, not from origination | Bulletin 12, Issue 9 | Paragraphs C1 and C4: reads the same |
| Impairment provision when a previous GAAP revaluation is deemed cost | Provision before the revaluation date cannot be reversed; one arising after it and before transition can be, if Ind AS 36 allows | Bulletin 8, Issue 5 | Paragraph D6: reads the same |
| Assets shown separately as held for sale under previous GAAP that fail Ind AS 105 on transition | D7AA covers them | Bulletin 10, Issue 4 | Paragraph D7AA: reads the same |
| Capital work-in-progress | D7AA is available, as it is property, plant and equipment under construction | Bulletin 3, Issue 11 | Paragraph D7AA: reads the same |
| Unrealised intragroup profit in an asset when D7AA is used on consolidation | Eliminate the profit first, then apply D7AA | Bulletin 12, Issue 5 | Paragraph D7AA; Ind AS 110, paragraph B86(c): reads the same |
| Wish to reverse the old capitalised exchange differences on foreign currency loans while using D7AA | Not permitted; the carrying amount is carried forward (this concerns the earlier AS 11 option and is transition history) | Bulletin 7, Issue 3 | Paragraph D7AA: reads the same |
| Fair value for some items and previous GAAP cost for others | Not available; D7AA is for all property, plant and equipment | Bulletin 5, Issue 3 | Paragraph D7AA: reads the same |
| Processing fees capitalised into assets on a loan taken before transition | Restate the loan to amortised cost; reduce the asset by the unamortised fee (net of depreciation effect); difference to retained earnings; not an adjustment to deemed cost | Bulletin 5, Issue 4 | Paragraphs 10 and D7AA; Ind AS 109 amortised cost: reads the same |
| A subsidiary formed by the entity itself and an additional stake bought before transition | The previous GAAP accounting for the extra stake stays if past business combinations are not restated | Bulletin 19, Issue 1 | Paragraphs B7 and C1: reads the same |
| A first-time adopter and the simplified transition method of Ind AS 115 | Not available; only the full retrospective method with the stated expedients | Bulletin 19, Issue 3 | Paragraphs 7, 9, D34 and D35: reads the same |
| Deferred tax on first-time adjustments booked in equity when the tax rate later changes | Follows the underlying item: profit or loss, other comprehensive income or equity, depending on where the source item would have been recognised | Bulletin 23, Issue 2 | Ind AS 12, paragraphs 57, 58, 60 and 61A: reads the same |
Issues left out and why
The two answers on a government grant received before transition, one where fair value is used as deemed cost and one where previous GAAP cost is used (compendium Issues 30 and 37), are left out. Each assumed that Ind AS 20 allowed only the deferred income method. Paragraph 24 of Ind AS 20 as printed in the compendium now permits either deferred income or deduction from the asset's carrying amount, following a notification of 20 September 2018, so those answers should not be applied as they stand. The answers on long-term foreign currency items under paragraph D13AA (compendium Issues 39 to 45) belong to part 2 of this digest.
Three answers explained
Consequential adjustments (Bulletins 5, 12). Paragraph D7AA says no further adjustment is to be made to the deemed cost for transition adjustments from other Ind AS. ITFG separates two things: a change to the carried-forward amount of the asset itself (not allowed) and a knock-on change that exists only because another item has to be restated, such as a loan moved to amortised cost whose capitalised fee sits inside the asset. The second is allowed because paragraph 10 requires Ind AS to be applied to the loan.
The all-or-nothing rule (Bulletin 5, Issue 3). The exemption speaks of all property, plant and equipment. It cannot be used for the factory and ignored for the head office.
Retrospective by default (Bulletin 1, Issue 5). Where Ind AS 101 gives no exception or exemption, as for the functional currency test, paragraph 10 makes Ind AS apply to the opening balance sheet as if always in force.
What a finance team should take from this
- Decide at the outset whether D7AA is used, and apply it to every class of property, plant and equipment.
- List consequential adjustments (loans, grants, provisions) separately from deemed cost so the reconciliation shows them.
- For any answer older than 2018, re-read the paragraph in the standard before relying on it, as the grant issues show.
Need help with the opening Ind AS balance sheet?
If your transition date is approaching, our team can build the opening balance sheet, the deemed cost workings and the reconciliation to previous GAAP through our financial statement preparation service.
Key takeaways
- The opening balance sheet is struck at the start of the date of transition.
- D7AA is all or nothing across property, plant and equipment and carries the previous GAAP amount without adjustment, apart from consequential items.
- Capital work-in-progress and held-for-sale presentations under old GAAP are inside the exemption.
- First-time adopters cannot use the simplified transition method of Ind AS 115.
- The grant answers are not safe to use after the 2018 change to Ind AS 20.
Read next
- ITFG clarifications on Ind AS 101 (part 2): foreign currency items, investments in subsidiaries and past combinations
- First-time adoption under Ind AS 101
- ITFG clarifications on Ind AS applicability
- Deemed cost under Ind AS 101
Disclaimer: Based on the Indian Accounting Standards as on 1 April 2025 (ICAI Compendium of Ind AS 2025-26, the standards notified under the Companies (Indian Accounting Standards) Rules, 2015) and, where named, the ITFG clarification bulletins of ICAI, as consulted on 4 October 2026. Amendments notified after 1 April 2025 should be checked on mca.gov.in. This article is general information, not legal advice; check the official text before acting.