I am currently in the process of first-time adoption of Ind AS and have opted for the full retrospective approach as per Ind AS 101.
I am a pre-operational hotel business, with commercial operations commencing in January 2025. Until then, all my pre-opening expenses (including rent, interst ect etc.) have been capitalised under CWIP in line with I-GAAP.
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🔹 Lease Accounting Background:
Under I-GAAP, I had passed the following entries at the commencement of lease:
Dr. Rent Expense (capitalised to CWIP)
Dr. Security Deposit (at actual amount paid)
Cr. Bank
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🔹 Transitioning to Ind AS:
Now, as part of first-time adoption, I am:
Preparing the opening Ind AS balance sheet as on 1st April 2023 (transition date), and
Applying Ind AS 116 (Leases) retrospectively from the commencement date of lease.
I have computed:
ROU Asset (including the difference between actual and PV of Security Deposit)
Lease Liability
Present Value (PV) of Security Deposit
I have now passed the correct retrospective lease entry (as if it were passed on lease commencement date), as follows:
Dr. ROU Asset (includes difference between SD actual & PV)
Dr. Security Deposit (at PV)
Cr. Lease Liability
Cr. Security Deposit (at actual paid amount)
Example:
If SD paid = ₹1,00,000, PV = ₹70,000 → Difference ₹30,000 added to ROU.
So, ROU = ₹1,20,000 + ₹30,000 = ₹1,50,000
Lease Liability = ₹1,30,000
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🔹 Now, My Queries:
1. Transition Date Entry (1st April 2023)
Since I’ve already retrospectively accounted for the lease from commencement, and the net difference is zero after adjustments,
👉 Do I need to pass any journal entry on the transition date?
Or is it sufficient to just restate the opening balances of ROU asset and Lease Liability, and reclassify CWIP appropriately?
2. CWIP Treatment
Since all lease-related expenses were previously routed through CWIP under I-GAAP (being pre-opening phase),
👉 Should I now reverse those amounts from CWIP and transfer them to respective Ind AS-compliant heads like ROU Asset?
If yes, what would be the journal entry to properly reduce CWIP and reflect lease-related assets?
And how should I map CWIP balances to ROU/LL in my financials?
CAclubindia
