CAPSULE FR | 4R Policy Explained Record, Remove, Remeasure, Reclassify | Ind AS First-Time Adoption

Now, what does Ind AS say? It follows the famous 4R Policy. What is the 4R Policy? It means that on the date of transition (1 April 2020), you need to perform four actions. Take 1 April 2020 as your base date. Imagine that you are preparing the 2021–22 financial statements as Ind AS-compliant financial statements for the first time. The four actions are: Record Remove Remeasure Reclassify 1. Record Suppose there is an asset, liability, or equity item that was not recognized under the previous GAAP (Old AS), but Ind AS requires it to be recognized. In that case, simply record it. The entity has to record all assets, liabilities, and equity items that are required under Ind AS but were not recognized under the existing GAAP. 2. Remove Now suppose there is an asset, liability, or equity item that exists under the previous GAAP, but Ind AS does not permit it to be recognized. Then, remove it. 3. Remeasure If the carrying amount of any asset, liability, or equity item under the previous GAAP is different from the amount required under Ind AS, then remeasure it to the Ind AS amount. 4. Reclassify Sometimes, an item needs to be presented differently under Ind AS. For example: A non-current asset may need to be classified as a current asset. A liability may need to be classified as equity. An equity item may need to be classified as a liability. In such cases, reclassify the item. So, on 1 April 2020, perform these four actions: Record what Ind AS requires to be recognized. Remove what Ind AS does not permit. Remeasure amounts wherever required. Reclassify items into the appropriate category. These four actions apply to assets, liabilities, and equity, because our objective is to prepare an Opening Ind AS Balance Sheet that fully complies with Ind AS. That's the essence of the 4R Policy. #IndAS #IndAS101 #FirstTimeAdoption #AccountingStandards #FinancialReporting #CAFinal #CAStudents #Commerce #Accounting #Finance #IFRS #CorporateAccounting #Audit #Accountancy #LearningMadeSimple #ConceptLearning #SudarshanSir #SAGC #CAFinalFR #ProfessionalEducation