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Under Ind AS 101, an entity may elect to RESET CUMULATIVE TRANSLATION DIFFERENCES to ZERO at the date of transition. The effect of this election is that:
AFuture foreign operations cannot recognise any further translation differences
BThe accumulated translation differences are transferred to RETAINED EARNINGS at transition; subsequent translation differences are tracked fresh from transition date
CThe differences are written off to the statement of profit and loss
DThe differences are reclassified to share capital
Answer & Solution
Correct answer: B. The accumulated translation differences are transferred to RETAINED EARNINGS at transition; subsequent translation differences are tracked fresh from transition date
Para D12 — reset election: cumulative translation differences for all foreign operations are deemed zero at transition; the previous-GAAP balance is transferred to retained earnings. Subsequent translation under Ind AS 21 starts afresh from the transition date. This is a major simplification that avoids reconstructing FX history.
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