Ind AS Solutions for CA Final

Question 1

1. WDV of asset at the end of year 2014-15 = Rs.

5,00,000 Rs. 45,000 x 3 = Rs. 3,65,000;
2. WDV of asset at the end of year 2014-15 (by
reducing balance method) = Rs. 5,00,000 x 85% x
85% x 85% = Rs. 3,07,062.50;
3. Depreciation for the year 2015-16 @ 15% =
3,07,062.50 x 15% = Rs. 46,059.38
4. Excess dep. to be charged in year 2015-16 = Rs.
3,65,000 Rs. 3,07,062.50 = Rs. 57,937.50;

Question 2

Particulars
Interest received p.a. at 6%
PV of interest for Years 1 to 4
[6,000 (x) 3.169]
PV of principal repayment after 4 years
[1,00,000 (x) 0.6830]
Total Liability Component
Fair Value
Equity Component (balancing figure)

Rs.
6,000
19,014
68,300
87,314
1,00,000
12,686

Question 3

Computation of Deferred Tax Provision

Particulars

Carrying
Amount
10
5
4
3
6
2

Tax Base

Property
Plant & Equip.
Inventory
Trade Receivables
Trade Payables
Cash
Net T.D.
DT Provision @ 30% = Rs. 3,00,000/=

7
4
6
4
6
2

Temporary
Differences
-3
-1
2
1
0
0
-1

Question 4

Solution
Thefunctional currency of the undertaking is
the Indian Rupees.
The Companys environment that determines the
sellingpriceofitsproductsanditscostsdrivesthe
determination of functional currency. Although the
clients are billed in USD, the selling prices will be
driven by the Indian economy, not by the US
economy.
Here,the presentation currency is a matter of
choice.And, a company may select to present at
asmanypresentationcurrenciesasitlikes.

Question 5

 The present value of Revenue = Rs. 934

(Rs.1000x1/1.07).
RevenueofRs.934isrecognisedatdateof
sale and the Rs. 66 is recognised as
income spread over the life of the
promissorynote.

Question 6

Classification Analysis
Particulars

Age as on
31.3.2015
[Months]

Current
Assets
[Rs. Lakhs]

Trade receivables arising

out of goods sold on
1.7.2014
Trade receivables arising
out of goods sold on
1.2.2014
Trade receivables arising
out of goods sold on
1.10.2014
Total

10.00

Non
Current
Assets
[Rs. Lakhs]
-

14

5.00**

20.00

30.00

5.00

Question 7

 Cash equivalents are short-term, highly-liquid

investmentsthatare:
a) readily convertible to known amounts of cash;
and
b) which are subject to an insignificant risk of
changes in value;
) Thus, Rs. 10 Lakhs into a 12 month term account
earning6.80%interestisclassifiedasCashEquivalent

Question 8

Statement of Profit and Loss [Extract]

Particulars
2016
2015
Sales
1,04,000
73,500
Cost of Goods Sold
(80,000)
(60,000)
[86,500 6,500] [53,500 + 6,500]
PBT
24,000
13,500
Income Tax @ 30%
(7,200)
(4,050)
PAT
16,800
9,450
Statement of Changes in Equity [Extract]
Share
Retained
Total
Capital
Earnings
Balance at 31.12.2014
5,000
20,000 25,000
Profit for the year ended on 31.12.2015
9,450
9,450
[restated]
Balance at 31.12.2015
5,000
29,450 34,450
Profit for the year ended on 31.12.2016
16,800 16,800

Question 9

1) ABC Limited has prepared its financial statements

for the period ended on 31.12.2015;
2) On 31.1.2016, the directors have declared dividend
worth Rs. 2.5 millions before the authorisation of
financial statements;
3) How this should be treated in the financial
statements
Such a proposed dividend is not an adjusting
event under Ind AS 10;
Only appropriate disclosures are required in the
notes to accounts

Question 10

1) Ind AS 10: Financial difficulties of customer existed

as on 31.3.2015 and by 30.4.2015 additional evidence
confirmed the impairment of receivables from the
customer [known as impairment of financial assets
underIndAS109];
2) Ind AS 109:
) Althoughthecustomerisexpectedtopaytheamount
due but the company has deferred the date of
payment by a year;
) IndAS 109 requires such financial assets to be remeasured at PV of the expected future receipts at
appropriate discounting rate [say6%here];
) Thus, trade receivables should be measured at
Rs. 4,71,698 [Rs. 5,00,000/ 1.06] and the

Question 11

On 1.6.2015, X Limited purchases raw material at Rs. 60 lakhs. As

per the terms of the contract, the entity would pay the amount after
2 years. The incremental borrowing rate is 11%
Purchase Price = Rs. 60 lakhs / [1+11%]^2 = Rs. 48.70 lakhs
1.6.2015
Purchase A/c Dr.
48.70
To Trade Payables A/c
48.70
31.3.2016 Finance Costs A/c Dr.
4.46
To Trade Payables A/c
4.46
31.3.2017 Finance Costs A/c Dr.
5.85
To Trade Payables A/c
5.85
31.5.2017 Finance Costs A/c Dr.
0.99
To Trade Payables A/c
0.99
31.5.2017 Trade Payables A/c Dr.
60.00
To Bank A/c
60.00

Question 12

On 1.4.2016, X Limited acquired patent right for Rs. 50 lakhs. The

down payment is 20% and balance shall be paid over 5 equal
annual instalments. Incremental borrowing rate is 11%. Find out
the cost of patent.
Acquisition cost = PV of cash flows @ 11% = Rs. 39.57
Year
Cash
PVF
PV
Finance Creditors
Flows
Cost
0
10
1
10.00
0
29.57
1
8
0.9009
7.21
3.25
24.82
2
8
0.8116
6.49
2.73
19.55
3
8
0.7312
5.85
2.15
13.70
4
8
0.6587
5.27
1.51
7.21
5
8
0.5935
4.75
0.79
0.00
50.00
39.57
10.43
The finance cost shall be recognised over the period of deferred

Question 13 to 16

Control meaning

Aninvestor controls aninvesteewhen:

1. Is exposed or has rights to variable returns
fromitsinvolvementininvestee(=subsidiary)
2. Hastheability to affect those returns
3. Through its power overtheinvestee
all these factors need to be fulfilled
to establish control under Ind AS 110

Power meaning
It refers to the existing rights that give the current
Thus,
if the investor has control only
abilitytoaffecttherelevant
activities ofinvestee
on administrative activities and no
Existing
Current Ability
control
on Rights
relevant activities
then
there
is no control for the
purpose of
1. Voting/potential
Noneedofcontract
Indvotingrights
AS 110
2. Rightstoappoint,
reassignorremove
KMP/anotherentity
3. Rightstodirectthe
investeeto
transactionsforthe
benefitofinvestor
4. Otherrights

Relevant Activities
1. Selling/purchasing
2. R&D
3. Managingfinancial
assets
4. Acquisition/
disposalofPPE
5. Funding

 Q.13: If the voting rights are associated with relevant

activities(notlimitedonlytoadministrativerules),thenABC
Limited controls PQR Limited and it shall apply full
consolidationmethod;
Q.14: If ABC Limited has the current ability to direct the
relevant activities of PQR Limited, then it is presumed to
havecontroloverPQRLimitedevenifitdoescurrentlyhave
majorityofvotingrights;
Q.15: Although ABC Limited does not have majority of
voting rights giving control,ABC Limitedhas control based
on the contractual arrangement giving the power over
decision-making on relevant activities (via decisions on
KMP);
Q.16: ABCLimiteddoesnothavemajorityofvotingrights.

Question 17

Date
1.4.15

Particulars
Loans to Employees A/c
Employee Benefit Exp. A/c
To Bank A/c

Dr.
Dr.

Dr.
8,71,362
1,28,638

Cr.

10,00,000

31.3.16 Loans to Employees A/c

To Intt. Accrued A/c

Dr.

31.3.16 Bank A/c

To Loans to Employees A/c

Dr.

31.3.16 Intt. Accrued A/c

To P & L A/c

Dr.

69,709
69,709
2,00,000
2,00,000

31.3.16 P & L A/c

Dr.
To Employee Benefit Exp. A/c

69,709
69,709
1,28,638
1,28,638

Question 18

Date
1st Yr.
Beg.

Particulars
Bank A/c
P & L A/c
To Debentures A/c

Dr.
Dr. 100.00
Dr. 12.70

Cr.

112.70

1st Yr.
End

Interest A/c
To Debentures A/c

Dr. 11.27

1st Yr.
End

P & L A/c
To Interest A/c

Dr. 11.27

3rd Yr.
End

Interest A/c
To Debentures A/c

Dr. 14.25

3rd Yr.
End

P & L A/c
To Interest A/c

Dr. 14.25

3rd Yr.
End

Debentures A/c
To Equity Share Capital A/c
To Securities Premium A/c

Dr. 150.00

11.27
11.27
14.25
14.25
100.00
50.00

Question 19

1) AsthereisnoincreaseinCreditRisksinceinitial
recognition, Lifetime Expected Credit Loss is not
requiredtoberecognised;
2) 2MonthsExpectedCreditLosstoberecognized
= Rs. 1 Million LGD 25% 12Months POD
0.5%=Rs.1,250

Question 20

Loss Rate Approach

At the reporting date, an Entity assesses that

the expected increase in defaults represents a
significant increase in Credit Risk since initial
recognition. Additional Information is an under.
Compute the Expected Credit Loss to be
Age
(In
Current
1 30
31 60
61 90
91 +
recognized.

Days)
Default
Rate
Gross
Carrying
Amount
(in Lakhs)

0.3%

1.6%

3.6%

6.6%

10.6%

150

75

40

25

10

Solution
Age
Current
1 30
31 60
61 90
91 + Days

Default Rate
GCV ( in
LECL = DR
(DR)
Lakhs)
GCV (`000)
0.3%
150
45
1.6%
75
120
3.6%
40
144
6.6%
25
165
10.6%
10
106
LECL Allowance
580

Question 21

Particulars
Basic Costs
Sales taxes
Employment
Costs
Other
overheads
Payments to
advisors
Dismantling
Costs
Total

Amount
Remarks
10,000 Purchase costs included
NIL Recoverable sales taxes not included
800 Employment costs in the period of
getting the plant ready for use
[1200 (x) 2/ 3]
600 Abnormal costs excluded [900 (-) 300]
500 Directly attributable costs
1,360 Recognised at PV where obligation exists
[2,000 (X) 0.68]
13,260

Question 22

 Weighted-average cost of funds borrowed =

(5 m 7%) + (7 m 8%) + (10 m 9%)
(5 m + 7 m + 10 m)
= (1.81 m/ 22 m) 100 = 8.22 % per annum
Total borrowing cost = 20 m 8.22 % p.a. 2 years
= 1.644 m 2 years = 3.288 m
Borrowing costs to be capitalized = Interest
expense investment income (resulting from
investment of idle funds) = 3,288,000 500,000 =
2,788,000

Question 23

Particulars
Dr.
Cr.
Land A/c
Dr.
1.2 million
Building A/c
Dr.
0.8 million
To Bank A/c
0.4 million
To Lease Payables A/c
1.6 million
When the land has an indefinite economic life, the land element
is normally classified as an operating lease, unless title is
expected to pass to the lessee. The buildings element is
classified as a finance, or operating, lease depending on the
agreement