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Under Ind AS 101, IND AS 109 PROSPECTIVE APPLICATION of the rule that the fair value at initial recognition differs from transaction price (and the difference is deferred when not based on Level 1 / observable data) means:
AThe entity ignores the difference entirely and uses transaction price as FV
BThe entity restates all historical FV-vs-transaction-price differences retrospectively
CThe entity applies this rule ONLY to transactions entered into on or after the date of transition — past transactions where transaction price differed from fair value need not have their deferred amounts recomputed
DThe entity recognises the deferred amount entirely in retained earnings at transition
Answer & Solution
Correct answer: C. The entity applies this rule ONLY to transactions entered into on or after the date of transition — past transactions where transaction price differed from fair value need not have their deferred amounts recomputed
An optional Ind AS 101 exemption — the Ind AS 109 deferral rule for FV-vs-transaction-price differences (when FV is not based on Level 1 or observable data) can be applied PROSPECTIVELY from the transition date. Past transactions remain on previous-GAAP basis. This avoids the need to recompute deferred Day 1 P&L for historical OTC-like transactions.
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