caparveenjindal.

com/lms 1

TOPIC WISE
QUESTIONS COVERED IN MTP
& RTP VIDEOS

(MTP & RTP videos & NOTES are

available:caparveenjindal.com/LMS)
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TOPIC PAGE NUMBER

1. IND AS 109 3
2. IND AS 102 11
3. IND AS 37 15
4. IND AS 116 20
5. IND AS 12 25
6. IND AS 103 31
7. IND AS 7 42
8. IND AS 16 50
9. IND AS 36 55
10. IND AS 101 62
11. IND AS 1 71
12. IND AS 10 81
13. IND AS 110 85
14. IND AS 33 91
15. IND AS 21 96
16. IND AS 8 100
17. IND AS 20 102
18. IND AS 115 106
19. IND AS 40 112
20. IND AS 23 116
21. IND AS 108 119
22. IND AS 2 121
23. IND AS 28 124
24. IND AS 19 126
25. IND AS 24 129
26. IND AS 38 131
27. CFOFR 133
28. IND AS 105 135
29. IND AS 111 137
30. IND AS 41 139
31. IND AS 113 141
32. IND AS 34 143
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TOPIC 1
Financial Instruments (Ind AS 109)

QUESTION 1

(MTP 1 VIDEO MARCH 2019)

(TIMING IN VIDEO: 03:01 minutes) (8 marks)
(Question number in mtp: 6b)

On 1 April 2018, an 8% convertible loan with a nominal value of Rs 6,00,000 was

issued at par. It is redeemable on 31 March 2022 also at par. Alternatively, it
may be converted into equity shares on the basis of 100 new shares for each of
Rupess 200 worth of loan.
An equivalent loan without the conversion option would have carried interest at
10% interest of Ra 48,000 has already been paid and included as a finance Cost.
Year End @8% @19%
1 0.93 0.91
2 0.86 0.83
3 0.79 0.75
4 0.73 0.68

How will the Company present the above loan notes in the financial statements
for the year ended 31 March 2019?

QUESTION 2

(MTP 1 VIDEO MARCH 2019)

(TIMING IN VIDEO: 01:03:14) (8 marks)

(Question number in mtp: 4b)

QA Ltd issued 10,00,000 of 8% long term bond-A Series of Rs. 1 each on 1st
April, 2016 the bond tenure is 3 years. Interest in payable annually on 1st April
each year. The investors expect an effective interest rate on the loan at 10% .
QA Ltd. Wants you to suggest the suitable accounting entries for the issue of
these bonds as per applicable IND AS. Consider the discounting factor 3 years,
10% discounting factor is 0.751315 and 3 years cumulative discounting factor is
2.48685.
(i) What is the principal value of the bond at the initial recognition at the time of issue
or bond as per applicable Ind AS?
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(ii) What is the present value of the interest payment to be recognized as part of the
sale price of the bond as per applicable Ind AS?
(iii) What are the proceeds of the sale of the bond to be recognized at the time of
initial recognition as per applicable Ind AS?
(iv) What is the accounting entry to be passed at the time of accounting for payment
of interest for the first year?

QUESTION 3

(MTP 2 VIDEO APRIL 2019)

(TIMING IN VIDEO: 01:00:19) (12 marks)
(Repurchase Option) (Question number in mtp: 5a)

On 1St April,2014 Shelter Ltd. issued 5,000 8% convertible debentures with a face value
of Rs. 100 each maturing on 31st March, 2019. The debentures are convertible into equity
shares of Shelter Ltd at a conversion price of Rs. 105 per share, interest is payable
annually in cash. At the date of issue, shelter Ltd. could have issued non-convertible debt
with a 5 year term bearing a coupon interest rate of 12%. On 1St April, 2017 convertible
debenture have a fair value of Rs. 5,25,000. Shelter Ltd makes a tender offer to
debenture holders to repurchase the debentures for Rs 5,25,000 which the holders
accepted. At the date of repurchase, Shelter Ltd. could have issued non-convertible debt
with a 2 year term bearing a coupon interest rate of 9%.
Show accounting entries in the books of Shelter Ltd. for recording of equity and liability
component:
(i) At the time of initial recognition and
(ii) At the time of repurchase of the convertible debentures.

The following present values of Rs. 1 at 8%,9% & 12% are supplied to you:
Interest Year 1 Year 2 Year 3 Year 4 Year 5
Rate
8% 0.926 0.857 0.794 0.735 0.681
9% 0.917 0.842 0.772 0.708 0.650
12% 0.893 0.797 0.712 0.636 0.567
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QUESTION 4

(MTP 4 VIDEO MAY 2020)

(TIMING IN VIDEO: 00:20:30) (10 marks)
(Repurchase Option) (Question number in mtp: 2b)

Blueberry Ltd entered into following transaction during the year ended 31st March 20X2:
(a) Entered into a speculative interest rate option costing Rs. 10,000 on 1st April 20X0
to borrow Rs. 6,000,000 from Exon Bank Commencing 30th June 20X2 for 6 months
at 4%.The value of the option at 31st March, 20X2 was Rs. 15,250.
(b) Purchased 6% debentures in Fox Ltd. on 1st April, 20X1 (their issue date) for Rs.
150,000 as an investment. Blueberry Ltd. intends to hold the debentures, until their
redemption at a premium, in 5 years’ time The effective rate of interest of the
bond is 8%
(c) Purchased 50,000 shares in Cox Ltd. on 1st October, 20X2 for Rs. 3,50 each as an
investment. The share price oh 31st March, 20X2 was Rs. 3.75.
Show the accounting treatment and relevant extracts from the financial
statements for the year ended 31st March, 20X2 of transaction related to financial
instruments Blueberry Ltd. designates financial assets at fair value through Profit
or loss only when this is unavoidable.

QUESTION 5

(MTP 6 VIDEO OCTOBER 21)

(TIMING IN VIDEO: 00:23:08) (5marks)
(Repurchase Option) (Question number in mtp: 5b)

An entity purchases a debt instrument with a fair value of Rs. 1,000 on 15th March, 20X1
and measures the debt instrument at fair value through comprehensive income. The
instrument has an interest rate of 5% over the contractual term of 10 years, and has a
5% effective interest rate. At initial recognition, the entity determines that the asset
is not a purchased or original credit-impaired asset.

On 31st March 20X1 (the reporting date), the fair value of the debt instrument has
decreased to Rs. 950 as a result of changes in market interest rate. The entity
determines that there has not been a significant increase in credit risk since initial
recognition and that ECL should be measured at an amount equal to 12 month ECL, which
amounts to Rs. 30.

On 1st April 20X1, the entity decides to sell the debt instrument for Rs. 950, which is its
fair value at that date.
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Pass journal entries for recognition, impairment and sale of debt instruments as per Ind
AS 109, Entries relating to interest income are not to be provided

QUESTION 6

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 02:11:40)
(Question number in rtp: 9)

KK Ltd. has granted an interest free loan of ₹ 10,00,000 to its wholly owned Indian
Subsidiary YK Ltd. There is no transaction cost attached to the said loan. The
Company has not finalised any terms and conditions including the applicable interest
rates on such loans. The Board of Directors of the Company are evaluating various
options and has requested your firm to provide your views under Ind AS in following
situations:
(i) The Loan given by KK Ltd. to its wholly owned subsidiary YK Ltd. is interest
free and such loan is repayable on demand.
(ii) The said Loan is interest free and will be repayable after 3 years from the
date of granting such loan. The current market rate of interest for similar
loan is 10%. Considering the same, the fair value of the loan at initial
recognition is ₹ 8,10,150.
(iii) The said loan is interest free and will be repaid as and when the YK Ltd. has
funds to repay the Loan amount.
Based on the same, KK Ltd. has requested you to suggest the accounting treatment
of the above loan in the stand-alone financial statements of KK Ltd. and YK Ltd. and
also in the consolidated financial statements of the group. Consider interest for
only one year for the above loan.
Further the Company is also planning to grant interest free loan from YK Ltd. to KK
Ltd. in the subsequent period. What will be the accounting treatment of the same
under applicable Ind AS?

QUESTION 7

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 01:18:48)
(Question number in rtp: 10)

XYZ issued ₹ 4,80,000 4% redeemable preference shares on 1st April 20X5 at par.
Interest is paid annually in arrears, the first payment of interest amounting ₹
19,200 was made on 31st March 20X6 and it is debited directly to retained earnings
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by accountant. The preference shares are redeemable for a cash amount of ₹

7,20,000 on 31st March 20X8. The effective rate of interest on the redeemable
preference shares is 18% per annum. The proceeds of the issue have been recorded
within equity by accountant as this reflects the legal nature of the shares. Board
of directors intends to issue new equity shares over the next two years to build up
cash resources to redeem the preference shares.
Mukesh, Accounts manager of XYZ has been told to review the accounting of
aforesaid issue. CFO has asked from Mukesh the closing balance of preference
shares at the year end. If you were Mukesh, then how much balance you would have
shown to CFO on analysis of the stated issue. Prepare necessary adjusting journal
entry in the books of account, if required.

QUESTION 8 (MIXED WITH FOREIGN CURRENCY IND AS21)

(BEST QUESTION)

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 03:27:17)
(Question number in Rtp: 11)

An Indian entity, whose functional currency is rupees, purchases USD dominated

bond at its fair value of USD 1,000. The bond carries stated interest @ 4.7% p.a.
on its face value. The said interest is received at the year end. The bond has
maturity period of 5 years and is redeemable at its face value of USD 1,250. The
fair value of the bond at the end of year 1 is USD 1,060. The exchange rate on the
date of transaction and at the end of year 1 are USD 1 = ₹ 40 and USD 1 = ₹ 45,
respectively. The weighted average exchange rate for the year is 1 USD = ₹ 42.
The entity has determined that it is holding the bond as part of an investment
portfolio whose objective is met both by holding the asset to collect contractual
cash flows and selling the asset. The purchased USD bond is to be classified under
the FVTOCI category.
The bond results in effective interest rate (EIR) of 10% p.a.
Calculate gain or loss to be recognised in Profit & Loss and Other
Comprehensive Income for year 1. Also pass journal entry to recognise gain
or loss on above. (Round off the figures to nearest rupees)
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QUESTION 9 (GOOD QUESTION ON GUARANTEE)

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 04:30:06)
(Question number in Rtp: 15)

On 1 April 20X1, Sun Limited guarantees a ₹10,00,000 loan of Subsidiary – Moon

Limited, which Bank STDK has provided to Moon Limited for three years at 8%.
Interest payments are made at the end of each year and the principal is repaid at
the end of the loan term.
If Sun Limited had not issued a guarantee, Bank STDK would have charged Moon
Limited an interest rate of 11%. Sun Limited does not charge Moon Limited for
providing the guarantee.
On 31 March 20X2, there is 1% probability that Moon Limited may default on the
loan in the next 12 months. If Moon Limited defaults on the loan, Sun Limited does
not expect to recover any amount from Moon Limited.
On 31 March 20X3, there is 3% probability that Moon Limited may default on the
loan in the next 12 months. If Moon Limited defaults on the loan, Sun Limited does
not expect to recover any amount from Moon Limited.
Provide the accounting treatment of financial guarantee as per Ind AS 109
in the books of Sun Ltd., on initial recognition and in subsequent periods till
31 March 20X3.

QUESTION 10

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 01:46:46)
(Question number in Rtp: 11)

On 1st April, 20X1, PS Limited issued 6,000, 9% convertible debentures with a face
value of ₹ 100 each maturing on 31st March, 20X6. The debentures are convertible
into equity shares of PS Limited at a conversion price of ₹ 105 per share. Interest
is payable annually in cash. At the date of issue, non-convertible debt could have
been issued by the company at coupon rate of 13%. On 1st April, 20X4, the
convertible debentures have a fair value of ₹ 6,30,000. PS Limited makes a tender
offer to debenture-holders to repurchase the debentures for ₹ 6,30,000 which the
debenture holders accepted. At the date of repurchase, PS Limited could have
issued non-convertible debt with a 2 year term bearing coupon interest @ 10%.
Show accounting entries in the books of PS Limited for recording of equity and
liability component:
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(i) At the time of initial recognition

(ii) At the time of repurchase of the convertible debentures

QUESTION 11

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 01:13:42)
(Question number in Rtp: 6)

On 1st April, 2X01, Entity X issued a 10% convertible debenture with a face value
of ₹ 1,000 maturing on 31st March, 2X11. The debenture is convertible into ordinary
shares of Entity X at a conversion price of ₹ 50 per share. Interest is payable yearly
in cash. On 1st April, 2X02, to induce the holder to convert the convertible
debenture promptly, Entity X reduces the conversion price to ₹ 40 if the debenture
is converted before 1st June, 2X02 (ie, within 60 days). The market price of Entity
X’s ordinary shares on the date the terms are amended is ₹ 80 per share. How will
the revised terms be accounted?

QUESTION 12

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 02:18:32)
(Question number in Rtp: 14)

ABC Ltd. issues 4% 1,00,000 OCPS at a face value of ₹ 100 per share on 1st April,
20X1 and these are redeemable after 5 years, ie, on 31st March, 20X6. Dividend is
non-cumulative. Each preference shares entitles the holders to 10 equity shares
and the preference shares are optionally convertible by the holder at any time until
maturity.
How will the preference shares be classified at initial recognition assuming that a
comparable instrument carries a market interest rate of 7%? Provide journal
entries for year 1. Will this classification be changed subsequently in case there is
likelihood that OCPS will be encashed at the end of the maturity period?
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QUESTION 13

(RTP VIDEO NOV. 2022)

(TIMING IN VIDEO: 04:02:10)
(Question number in Rtp: 18)

On 1st April, 20X1 an entity granted an interest-free loan of ₹ 5,00,000 to an

employee for a period of three years. The market rate of interest for similar loans
is 5% per year.
On 31st March, 20X3, because of financial difficulties, the employee asked to
extend the interest-free loan for further three years. The entity agreed. Under
the restructured terms, repayment will take place on 31st March, 20X7. However,
the entity only expects to receive a payment of ₹ 2,50,000, given the financial
difficulty of the employee.
Explain the accounting treatment on initial recognition of loan and after
giving effect of the changes in the terms of the loan as per Ind AS 109.
Support your answer with Journal entries and amortised cost calculation, as
on the date of initial recognition and on the date of change in terms of loan.
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TOPIC 2
SHARE BASED PAYMENTS (Ind AS 102)

QUESTION 1

(MTP 1 VIDEO MARCH 2019)

(TIMING IN VIDEO: 00:26:51 minutes) (6marks) (MODIFICATION)
(Question number in mtp: 5b)

A Ltd. had on 1st April, 2015 granted 1,000 share option each to 2,000 employees.
The options are due to Vest on 31st March, 2018 provided the employee remains
in employment till 31st March 2018.
On 1st April 2015, the Directors of Company estimated that 1,800 employees
would qualify for the option on 31st March, 2018 This estimated was amended to
1,850 employees on 31st March 2016 and further amended to 1,840 employees on
31st March,2017
On 1st April, 2015 the fair value of an option was Rs. 1.20. The fair value increased
to Rs 1.30 as on 31st March, 2016 but due to challenging business conditions the
fair value declined thereafter. In September 2016. when the fair value of an
option was Rs. 0.90, the Directors repriced the option and this caused the fair
value to increase to Rs.1.05 Trading conditions improved in the second half of the
year and by 31st March, 2017 the fair value of an option was Rs. 1.25. QA Ltd
decided that additional cost incurred due to repricing of the options on 30th
September, 2016 should be spread over the remaining vesting period from 30 th
September, 2016 to 31st March, 2018
The Company has requested you to suggest the suitable accounting treatment for
these transaction as on 31st March, 2017.

QUESTION 2

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 01:45:47)
(Question number in rtp: 6)

A parent grants 200 share options to each of 100 employees of its subsidiary,
conditional upon the completion of two years’ service with the subsidiary. The fair
value of the share options on grant date is ₹ 30 each. At grant date, the subsidiary
estimates that 80 percent of the employees will complete the two-year service
period. This estimate does not change during the vesting period. At the end of the
vesting period, 81 employees complete the required two years of service. The
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parent does not require the subsidiary to pay for the shares needed to settle the
grant of share options.
Pass the necessary journal entries for giving effect to the above arrangement.

QUESTION 3

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 02:56:01)
(Question number in Rtp: 19)

An entity which follows its financial year as per the calendar year grants 1,000
share appreciation rights (SARs) to each of its 40 management employees as on 1st
January 20X5. The SARs provide the employees with the right to receive (at the
date when the rights are exercised) cash equal to the appreciation in the entity’s
share price since the grant date. All of the rights vest on 31st December 20X6;
and they can be exercised during 20X7 and 20X8. Management estimates that, at
grant date, the fair value of each SAR is ₹ 11; and it estimates that overall 10% of
the employees will leave during the two-year period. The fair values of the SARs at
each year end are shown below:

Year Fair value at year end

31 December 20X5 12
31 December 20X6 8
31 December 20X7 13

31 December 20X8 12
10% of employees left before the end of 20X6. On 31st December 20X7 (when the
intrinsic value of each SAR was ₹ 10), six employees exercised their options; and
the remaining 30 employees exercised their options at the end of 20X8 (when the
intrinsic value of each SAR was equal to the fair value of ₹ 12).
How much expense and liability is to be recognized at the end of each year?
Pass Journal entries.
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QUESTION 4 (HOLDING SUBSIDIARY SHARES)

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 01:36:06)
(Question number in Rtp: 12)

Company P is a holding company for company B. A group share-based payment is

being organized in which Parent issues its own equity shares to the employees of
company B. The details are as below –

Number of Employees of Company B 100

Grant date fair value of share ₹ 87
Number of shares granted to each employee 25
Vesting conditions Immediately
Face value per share ₹ 10
Pass the journal entries in the books of company P & company B.

QUESTION 5

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 03:50:45)
(Question number in Rtp: 16)

New Age Technology Limited has entered into following Share Based payment
transactions:
(i) On 1st April, 20X1, New Age Technology Limited decided to grant share
options to its employees. The scheme was approved by the employees on 30 th
June, 20X1. New Age Technology Limited determined the fair value of the
share options to be the value of the equity shares on 1st April, 20X1.
(ii) On 1st April, 20X1, New Age Technology Limited entered into a contract to
purchase IT equipment from Bombay Software Limited and agreed that the
contract will be settled by issuing equity instruments of New Age Technology
Limited. New Age Technology Limited received the IT equipment on 30th July,
20X1. The share-based payment transaction was measured based on the fair
value of the equity instruments as on 1st April, 20X1.
(iii) On 1st April, 20X1, New Age Technology Limited decided to grant the share
options to its employees. The scheme was approved by the employees on 30th
June, 20X1.
The issue of the share options was however subject to the same being approved by
the shareholders in a general meeting. The scheme was approved in the general
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meeting held on 30th September, 20X1. The fair value of the equity instruments
for measuring the share-based payment transaction was taken on 30th September,
20X1.
Identify the grant date and measurement date in all the 3 cases of Share
based payment transactions entered into by New Age Technology Limited,
supported by appropriate rationale for the determination?

QUESTION 6

(RTP VIDEO NOV 2022)

(TIMING IN VIDEO: 00:06:15)
(Question number in Rtp: 10)

The following particulars in respect of stock options granted by a company are

available:
No. of Employees covered 400 Nominal Value per share ₹ 100

No. of options per Employee 60 Exercise price per share ₹ 125

Shares offered were put in three groups. Group 1 was for 20% of shares offered
with vesting period one-year. Group II was for 40% of shares offered with vesting
period two- years. Group III was for 40% of shares offered with vesting period
three-years. Fair value of option per share on grant date was ₹ 10 for Group I, ₹
12.50 for Group II and ₹ 14 for Group III.

Position on 1st Year Position on 2nd Year Position on 3rd Year

- No. of employees - Employees left = 35 - Employees left = 28
left = 40
- Estimate of - Estimate of - Employees exercising
employees to leave employees to leave in Options in Group III
in Year 2 = 36 Year 3 = 30 = 295
- Estimate of - Employees
employees to leave exercising Options
in Year 3 = 34 in Group II = 319
- Employees
exercising Options
in Group I = 350
Options not exercised immediately on vesting, were forfeited. Compute expenses
to recognise in each year and show important accounts in the books of the
company.
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TOPIC 3
PROVISIONS, CONTINGENT LIAB.
(IND AS 37)

QUESTION 1

(MTP 1 VIDEO MARCH 2019)

(TIMING IN VIDEO: 00:13:06 minutes) (6marks)
(Question number in mtp: 5c)

During the year, QA Ltd. Delivered manufactured products to customer K. The

products were faulty and on 1St October, 2016 customer K commenced legal action
against the Company claiming damages in respect of losses due to the supply of
faulty product.
Upon investigating the matter, QA Ltd discovered that the products were faulty
due to defective raw material procured from supplier F. Therefore, on 1 st
December, 2016 the Company commenced legal action against F claiming damages
in respect of the supply of defective raw materials
QA Ltd. Has estimated that it’s probability of success of both legal actions, the
action of K against QA Ltd. And action of QA Ltd against F, is very high.
On 1st October, 2016 QA Ltd. Has estimated the damages it would have to pay K
would be Rs. 5 crores. This estimated was revised to Rs. 5.2 Crores as on 31st
March, 2017 and Rs. 5.25 crores as at 15th May, 2017 This case was eventually
settled on 1st June 2017, when the Company paid damages of Rs. 5.3 Crores to K.
On 1st December, 2016, QA Ltd had estimated that it would receive damages of
Rs. 3.5 crores from F. This estimate was revised to Rs. 3.6 crores as at 31st
March, 2017 and Rs. 3.7 crores as on 15th May, 2017. This case was eventually
settled on 1st June, 2017 when F paid Rs. 3.75 crores to QA ltd. QA Ltd. Had, in
its financial statements for the year ended 31st March 2017, provided Rs. 3.6
Crores as the financial statements were approved by the Board of Directors on
26th April,2017
(i) Whether the Company is required to make provision for the claim from customer K
as per applicable Ind AS? If yes, please give the rationale for the same.
(ii) If the answer to (a) above is yes, what is the entry to be passed in the books of
account as on 31st March, 2017? Give brief reasoning for your choice.
(A) Statement of Profit and Loss A/c Dr. Rs. 5.2 crores

To Current Liability A/c Rs. 5.2 crores

(B) Statement of Profit and Loss A/c Dr. Rs. 5.3 crores
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To Non-Current Liability A/c Rs. 5.3 crores

(C) Statement of Profit and Loss A/c Dr. Rs.5.25 Crores

To Current Liability A/c Rs. 5.25 crores

(iii) What will the accounting treatment of the action of QA Ltd. Against supplier F as
per applicable Ind AS?

QUESTION 2

(RTP VIDEO NOV. 2019)

(TIMING IN VIDEO: 00:15:47)
(Question number in Rtp: 18)

(a) A manufacturer gives warranties at the time of sale to purchasers of its

product. Under the terms of the contract for sale, the manufacturer
undertakes to remedy, by repair or replacement, manufacturing defects that
become apparent within three years from the date of sale. As this is the first
year that the warranty has been available, there is no data from the firm to
indicate whether there will be claim under the warranties. However, industry
research suggests that it is likely that such claims will be forthcoming.
Should the manufacturer recognize a provision in accordance with the
requirements of Ind AS 37. Why or why not?
(b) Assume that the firm has not been operating its warranty for five years, and
reliable data exists to suggest the following:
• If minor defects occur in all products sold, repair costs of ₹ 20,00,000
would result.
• If major defects are detected in all products, costs of ₹ 50,00,000 would
result.
• The manufacturer’s past experience and future expectations indicate
that each year 80% of the goods sold will have no defects. 15% of the
goods sold will have minor defects, and 5% of the goods sold will have
major defects.
Calculate the expected value of the cost of repairs in accordance with the
requirements of Ind AS 37, if any. Ignore both income tax and the effect
of discounting.
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QUESTION 3

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 01:04:39 )
(Question number in rtp: 6)

Entity XYZ entered into a contract to supply 1000 television sets for ₹ 2 million.
An increase in the cost of inputs has resulted into an increase in the cost of sales
to ₹ 2.5 million. The penalty for non- performance of the contract is expected to
be ₹ 0.25 million. Is the contract onerous and how much provision in this regard
is required?

QUESTION 4

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 04:10:20)
(Question number in Rtp: 5)

A manufacturer gives warranties to the purchasers of its goods. Under the terms
of the warranty, the manufacturer undertakes to make good, by repair or
replacement, manufacturing defects that become apparent within three years from
the date of sale to the purchasers.
On 30 April 20X1, a manufacturing defect was detected in the goods manufactured
by the entity between 1 March 20X1 and 30 April 20X1.
At 31 March 20X1 (the entity’s reporting date), the entity held approximately one
week’s sales in inventories.
The entity’s financial statements for the year ended 31 March 20X1 have not yet
been finalised.
Three separate categories of goods require separate consideration: Category
1—defective goods sold on or before 31 March 20X1
Category 2—defective goods held on 31 March 20X1
Category 3—defective goods manufactured in 20X1-20X2
State the accounting treatment of the above categories in accordance with
relevant Ind AS.
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QUESTION 5

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 01:04:47)
(Question number in Rtp: 5)

XYZ Ltd. offers a six-month warranty on its small to medium sized equipment, which
can be put to use by the customer with no installation support. The warranty comes
with the equipment and the customer cannot purchase it separately. This equipment
is typ ically sold at a gross margin of 40%. XYZ Ltd. has made a provision of ₹ 30,000
during the year ended 31st March, 20X2, which is approximately 1% of its gross
margin on the sale of these equipment. Based on past experience, it is expected
that 1% of equipment sold have been returned as faulty within the warranty period.
Faulty equipment returned to XYZ Ltd. during the warranty period are scrapped
and the sale value is fully refunded to the customer.
Assuming that sales occurred evenly during the year, how should XYZ Ltd.
evaluate whether any additional warranty provision is required on equipment
sold in the past as at 31st March, 20X2? Had the warranty period been 2
years instead of six months, what additional criteria would XYZ Ltd. need to
consider?

QUESTION 6 (VVI)

(RTP VIDEO NOV. 2022)

(TIMING IN VIDEO: 04:51:45)
(Question number in Rtp: 15)

HVCL manufactures heavy equipment for construction industry. An order for supply
of 90 equipment was received from ABIL. The unit price of the equipment was
agreed at ₹ 190 lakhs each. 64 equipment was supplied during the year 20X1-20X2
and balance quantity remaining to be supplied as on 31.3.20X2. HVCL has 5
equipment in its inventory as on 31.3.20X2. HVCL considered that the contract was
an onerous contract and therefore, the net realisable value of inventory has been
taken as value of inventory as on 31.3.20X2.
The management of HVCL contends that costs incurred towards administrative
overheads, finance charges, R & D expenses, sales overhead, head quarter
expenditure etc., are considered as period cost and hence not considered for
creation of provision. Hence, the same have not been included in the computation
of unavoidable cost.
The management of HVCL has submitted the details of costs that have been
considered for creation of provision towards onerous contract:
caparveenjindal.com/lms 19

o Material cost - includes cost of material procured, cost of freight & insurance
incurred for material procurement and handling, loading and unloading charges
incurred.
o Labour cost/ Factory Overheads - includes salaries and other expenses of
direct production department, and also expenses allocated from indirect
departments to direct department.
o Material Overheads - Includes salaries and other expenses (including
expenses allocated from other departments) booked under departments
linked with materials like purchases, stores and quality control.
Accordingly, provision has been made considering the above costs only. The value of
provision created for 21 remaining equipment to be produced is as per the working
shown below:

Particulars Value (₹ in lakh)

(i) Cost of production (which includes material cost, 199.00
labour cost/factory overhead and material overhead)
(ii) Selling price (190.00)
(iii) Differential cost per equipment 9.00
(iv) Differential cost of ₹ 9 Lakh per equipment for 21 189.00
equipment
Whether the company's accounting treatment of cost for creation of provision
towards onerous contracts is in line with the provisions of Ind AS 37?
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TOPIC 4
LEASES (IND AS 116)
QUESTION 1

(MTP 1 VIDEO MARCH 2019) (SALE & LEASE BACK)

(TIMING IN VIDEO: 01:08:06 minutes) (8marks)
(Question number in mtp: 3A)

(ORIGINALLY IT WAS ASKED FROM IND AS 17 BUT IT IS NOW IND AS

116)

QA Ltd. Sold a property on 1st April, 2016 for Rs. 48 crores to raise cash for the future
expansion of its business. The carrying value of the property on 1st April, 2016 was Rs.
50 crores and as per the independent valuation report the market value of the property
is Rs. 55 crores and the distress sale value is Rs. 52 crores. The estimated future life of
the property as on 1sth April, 2016 was 40 years.

However, since the administrative office of the Company was same premises and to avoid
and logistic inconvenience, the Company on the same day has taken the same premises
the lease and the annual rental for 10 year is follows:
Year 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th

Rent 1.00 1.20 1.30 1.40 1.50 1.60 1.70 1.80 1.90 2.00
in Rs
crores

The lease agreement is for the period of 10 years, however the same is cancellable after
initial period of 5 year. The Company as on date is expected to utilize the premises for
entire period of 10 years.

As per market survey, rentals for a similar property for a period is expected to be Rs
8.00 crores for the first five years and Rs 11 crores for next five years.
The Company wants you to suggest the accounting treatment of the above lease
transaction as per applicable Ind As.
caparveenjindal.com/lms 21

QUESTION 2

(MTP 9 VIDEO MARCH 2022)

(TIMING IN VIDEO: 01:06:41 minutes) (6marks)
(Question number in mtp: 4A)
The Company has taken a particular application software of a supplier
namely, Crystal Systems Limited, which is available on a cloud infrastructure
managed and controlled by the Crystal Systems Limited. The Company contracts to
pay a fee of ` 5,00,000 per month in exchange for a right to receive access to the
Crystal Systems Limited's application software for 2 years. The Company accesses
the software on need basis over the internet. The contract does not convey any
rights to New Age Technology Limited over the tangible assets of the Crystal
Systems Limited.
The Chief Accountant of New Age Technology Limited has sought your advice, whether
the IT should account for this transaction for use of software with Crystal Systems
Limited in terms of Ind AS 116 leases or an intangible asset in terms of Ind AS 38
‘Intangible Assets’. Help him to understand your assessment.

QUESTION 3

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 02:40:43)
(Question number in Rtp: 17)

Entity X (lessee) entered into a lease agreement (‘lease agreement’) with Entity Y
(lessor) to lease an entire floor of a shopping mall for a period of 9 years. The
annual lease rent of ₹ 70,000 is payable at year end. To carry out its operations
smoothly, Entity X simultaneously entered into another agreement (‘facilities
agreement’) with Entity Y for using certain other facilities owned by Entity Y such
as passenger lifts, DG sets, power supply infrastructure, parking space etc., which
are specifically mentioned in the agreement, for annual service charges amounting
to ₹ 1,00,000. As per the agreement, the ownership of the facilities shall remain
with Entity Y. Lessee's incremental borrowing rate is 10%.
The facilities agreement clearly specifies that it shall be co-existent and
coterminous with ‘lease agreement’. The facility agreement shall stand terminated
automatically on termination or expiry of ‘lease agreement’.
Entity X has assessed that the stand-alone price of ‘lease agreement’ is ₹ 1,20,000
per year and stand-alone price of the ‘facilities agreement’ is ₹ 80,000 per year.
Entity X has not elected to apply the practical expedient in paragraph 15 of Ind AS
caparveenjindal.com/lms 22

116 of not to separate non-lease component (s) from lease component(s) and
accordingly it separates non-lease components from lease components.
How will Entity X account for lease liability as at the commencement date?

QUESTION 4

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 01:40:40)
(Question number in Rtp: 11)

Entity X is an Indian entity whose functional currency is Indian Rupee. It has taken
a plant on lease from Entity Y for 5 years to use in its manufacturing process for
which it has to pay annual rentals in arrears of USD 10,000 every year. On the
commencement date, exchange rate was USD = ₹ 68. The average rate for Year 1
was ₹ 69 and at the end of year 1, the exchange rate was ₹ 70. The incremental
borrowing rate of Entity X on commencement of the lease for a USD borrowing was
5% p.a.
How will entity X measure the right of use (ROU) asset and lease liability
initially and at the end of Year 1?

QUESTION 5

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 01:18:58)
(Question number in Rtp: 7)

The Company has entered into a lease agreement for its retail store as on 1st April,
20X1 for a period of 10 years. A lease rental of ₹ 56,000 per annum is payable in
arrears. The Company recognized a lease liability of ₹ 3,51,613 at inception using an
incremental borrowing rate of 9.5% p.a. as at 1st April 20X1. As per the terms of
lease agreement, the lease rental shall be adjusted every 2 years to give effect of
inflation. Inflation cost index as notified by the Income tax department shall be
used to derive the lease payments. Inflation cost index was 280 for financial year
20X1-20X2 and 301 for financial year 20X3-20X4. The current incremental
borrowing rate is 8% p.a.
Show the Journal entry at the beginning of year 3, to account for change in lease.
caparveenjindal.com/lms 23

QUESTION 6

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 02:44:06)
(Question number in Rtp: 8)

Case I
Scenario 1: The ‘last mile’ is a dedicated cable that connects Entity Y’s network
with the end customer’s device. The use of this cable is at the discretion of the
customer. Entity Y decides the location of end points and has right to replace the
lines (dedicated cable), however it is not practical to replace the lines, since
replacement would require additional costs to be incurred without any
corresponding benefit. Whether the arrangement would be within the scope of Ind
AS 116?
Scenario 2: If it is practical for the Entity Y to replace the lines and Entity Y would
benefit from this replacement, would the answer be different?
Case II
Customer X enters into a 10-year contract with a utility company, Entity Y, for the
right to use three specified, physically distinct fibers within a larger cable
connecting Mumbai to Delhi. Customer makes the decisions about the use of the
fibers by connecting each end of the fibers to its electronic equipment. Entity Y
owns extra fibers but can substitute those for Customer’s fibers only for reasons
of repairs, maintenance or malfunction. The useful life of the fiber is 15 years.
Whether this arrangement is covered under Ind AS 116?
Case III
Customer X enters into a 10-year contract with Entity Y for the right to use a
specified amount of capacity within a cable connecting Mumbai to Delhi. The
specified amount is equivalent to Customer X having the use of the full capacity of
three fiber strands within the cable (the cable contains multiple fibers with similar
capacities). Entity Y makes decisions about the transmission of data (i.e., Entity Y
lights the fibers, makes decisions about which fibers are used to transmit
Customer’s traffic). The useful life of the fiber is 15 years. Whether this
arrangement is covered under Ind AS 116?
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QUESTION 7 (MANUFACTURE/DEALER) (VVI)

(RTP VIDEO NOV 2022)

(TIMING IN VIDEO: 02:08:31)
(Question number in Rtp: 2)

A company manufactures specialised machinery. The company offers customers the

choice of either buying or leasing the machinery. A customer chooses to lease the
machinery. Details of the arrangement are as follows:
(i) The lease commences on 1st April, 20X1 and lasts for three years.
(ii) The lessee is required to make three annual rentals payable in arrears of ₹
57,500.
(iii) The leased machinery is returned to the lessor at the end of the lease.
(iv) The fair value of the machinery is ₹ 1,50,000, which is equivalent to the selling
price of the machinery
(v) The machinery cost ₹ 1,00,000 to manufacture. The lessor incurred
costs of ₹ 2,500 to negotiate and arrange the lease.
(vi) The expected useful life of the machinery is 3 years. The machinery has an
expected residual value of ₹ 10,000 at the end of year three. The estimated
residual value does not change over the term of the lease.
(vii) The interest rate implicit in the lease is 10.19%. The lessor classifies the lease
as a finance lease.
How should the Lessor account for the same in its books of accounts? Pass
necessary journal entries.
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TOPIC 5
TAXES ON INCOME(IND AS 12)
QUESTION 1

(MTP 1 VIDEO MARCH 2019)

(TIMING IN VIDEO: 01:19:22 minutes) (10marks)
(Question number in mtp: 2B)

QA Ltd. Is in the process of computation of the deferred taxes as per applicable Ind
AS and wants guidance on the tax treatment for the following:
(i) QA Ltd. does not have taxable income as per the applicable tax laws, but pays
Minimum alternate Tax’(MAT) based on its books profits The tax paid under
MAT can be carried forward for the next 10 years and as per the Company
projections submitted to its bankers, it is in a position to get credit for the
some by the end of eighth year. The Company is recognising the MAT credit
as a current asset under IGAAP. The amount of MAT credit as on 31st March,
2016 is Rs. 8.5 crores and as on 31st March,2017 is Rs 9.75 crores;
(ii) The Company measures its head office property using the revaluation model.
The Property is revalued every year as on 31st March. On 31st March 2016 the
carrying value of the property (after revaluation) was Rs 40 crores whereas
its tax base was RS 22 crores. During the Year ended 31St March, 2017, the
Company charged depreciation in its statement of profit and Loss of R. 2
crores and claimed a tax deduction for tax depreciation of Rs 1.25 crores. On
31st March, 2017 the property was revalued to Rs. 45 crores. AS per the tax
laws, the revaluation of Property, Plant & Equipment does not affect taxable
income at the time of revolution.
The Company has no other temporary differences other than those indicated
above. The Company wants you to compute the deferred tax liability as on 31st
March,2017 and the charge/credit to the Statement of Profit and Loss and/or
Other Comprehensive income for the same Consider the tax rate at 20%
caparveenjindal.com/lms 26

QUESTION 2

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 00:38:28)
(Question number in rtp: 2)

PQR Ltd., a manufacturing company, prepares consolidated financial statements to

31st March each year. During the year ended 31st March, 2018, the following events
affected the tax position of the group:
• QPR Ltd., a wholly owned subsidiary of PQR Ltd., incurred a loss adjusted for
tax purposes of ₹ 30,00,000. QPR Ltd. is unable to utilise this loss against
previous tax liabilities. Income-tax Act does not allow QPR Ltd. to transfer
the tax loss to other group companies. However, it allows QPR Ltd. to carry
the loss forward and utilise it against company’s future taxable profits. The
directors of PQR Ltd. do not consider that QPR Ltd. will make taxable profits
in the foreseeable future.
• During the year ended 31st March, 2018, PQR Ltd. capitalised development
costs which satisfied the criteria as per Ind AS 38 ‘Intangible Assets’. The
total amount capitalised was ₹ 16,00,000. The development project began to
generate economic benefits for PQR Ltd. from 1st January, 2018. The
directors of PQR Ltd. estimated that the project would generate economic
benefits for five years from that date. The development expenditure was fully
deductible against taxable profits for the year ended 31st March, 2018.
• On 1st April, 2017, PQR Ltd. borrowed ₹ 1,00,00,000. The cost to PQR Ltd. of
arranging the borrowing was ₹ 2,00,000 and this cost qualified for a tax
deduction on 1st April 2017. The loan was for a three-year period. No interest
was payable on the loan but the amount repayable on 31st March 2020 will be
₹ 1,30,43,800. This equates to an effective annual interest rate of 10%. As
per the Income-tax Act, a further tax deduction of ₹ 30,43,800 will be
claimable when the loan is repaid on 31st March, 2020.
Explain and show how each of these events would affect the deferred tax assets /
liabilities in the consolidated balance sheet of PQR Ltd. group at 31st March, 2018
as per Ind AS. The rate of corporate income tax is 30%.
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QUESTION 3

(RTP VIDEO NOV. 2019)

(TIMING IN VIDEO: 00:05:32)
(Question number in Rtp: 19)

An entity is finalising its financial statements for the year ended 31st March, 20X2.
Before 31st March, 20X2, the government announced that the tax rate was to be
amended from 40 per cent to 45 per cent of taxable profit from 30th June, 20X2.
The legislation to amend the tax rate has not yet been approved by the legislature.
However, the government has a significant majority and it is usual, in the tax
jurisdiction concerned, to regard an announcement of a change in the tax rate as
having the substantive effect of actual enactment (i.e. it is substantively enacted).
After performing the income tax calculations at the rate of 40 per cent, the entity
has the following deferred tax asset and deferred tax liability balances:
Deferred tax asset ₹ 80,000
Deferred tax liability ₹ 60,000
Of the deferred tax asset balance, ₹ 28,000 related to a temporary difference.
This deferred tax asset had previously been recognised in OCI and accumulated in
equity as a revaluation surplus.
The entity reviewed the carrying amount of the asset in accordance with para 56
of Ind AS 12 and determined that it was probable that sufficient taxable profit to
allow utilisation of the deferred tax asset would be available in the future.
Show the revised amount of Deferred tax asset & Deferred tax liability and
present the necessary journal entries.

QUESTION 4 (MIXED WITH IND AS 103)

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 01:20:53)
(Question number in Rtp: 4)

On 1 January 2020, entity H acquired 100% share capital of entity S for ₹15,00,000.
The book values and the fair values of the identifiable assets and liabilities of
entity S at the date of acquisition are set out below, together with their tax bases
in entity S’s tax jurisdictions. Any goodwill arising on the acquisition is not
deductible for tax purposes. The tax rates in entity H’s and entity S’s jurisdictions
are 30% and 40% respectively.
caparveenjindal.com/lms 28

Acquisitions Book values Tax base Fair values

₹’000 ₹’000 ₹’000
Land and buildings 600 500 700
Property, plant and equipment 250 200 270
Inventory 100 100 80
Accounts receivable 150 150 150
Cash and cash equivalents 130 130 130
Accounts payable (160) (160) (160)
Retirement benefit obligations (100) - (100)

You are required to calculate the deferred tax arising on acquisition of Entity S.
Also calculate the Goodwill arising on acquisition.

QUESTION 5

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 00:25:10)
(Question number in Rtp: 19)

The entity has an identifiable asset ASSOTA with a carrying amount of ₹ 10,00,000.
Its recoverable amount is ₹ 6,50,000. The tax base of ASSOTA is ₹ 8,00,000 and
the tax rate is 30%. Impairment losses are not tax deductible. Entity expects to
continue to earn profits in future.
For the identifiable asset ASSOTA, what would be the impact on the deferred tax
asset/ liability at the end of the period?

QUESTION 6

(RTP VIDEO NOV 2022)

(TIMING IN VIDEO: 01:22:12)
(Question number in Rtp: 5)

Following is the summarized statement of profit and loss of EARTH Limited as per
Ind AS for the year ended 31st March 20X1:

Particulars ₹ in Crore
Revenue from operations 1,160.00
Other income 56.00
caparveenjindal.com/lms 29

Total Income (A) 1,216.00

Purchase of stock-in-trade 40.00
Changes in inventories of stock-in-trade 6.00
Employee benefits expense 116.00
Finance costs 130.00
Depreciation and amortization expense 30.00
Other expenses 300.00
Total Expenses (B) 622.00
Profit Before Tax (A-B) 594.00
Current tax 165.40
Deferred tax 1.50
Tax Expenses 166.90
Profit after Tax 427.10

Additional information:
• Corporate income tax rate applicable to EARTH Limited is 30%.
• Other income includes long-term capital gains of ₹ 10 crore which are taxable
at the rate of 10%.
• Other expenses include the following items which are not deductible for
income tax purposes:
Item ₹ in Crore

Penalties 1.00
Impairment of goodwill 44.00
Corporate Social Responsibility expense 6.00

• Other expenses include research and development (R & D) expenditure of ₹ 8

crore in respect of which a 200% weighted deduction is available under income
tax laws.
• Other income includes dividends of ₹ 4 crore, which is exempt from tax.
• Profit before tax of ₹ 594 crore includes (i) agriculture income of ₹ 55 crore
which is exempt from tax; and (ii) profit of ₹ 60 crore earned in the USA on
which EARTH Limited is required to pay tax at the rate of 20%.
• Depreciation as per income tax laws is ₹ 25.0 crore.
During review of the financial statements of EARTH Limited, the CFO multiplied
profit before tax by the income tax rate and arrived at ₹ 178.2 crore as the tax
expense (₹ 594 crore x 30% = ₹ 178.2 crore). However, actual income tax expense
appearing in the summarized statement of profit and loss is ₹ 166.9 crore.
caparveenjindal.com/lms 30

The CFO has sought your help in reconciling the difference between the two tax
expense amounts. Prepare a reconciliation containing the disclosure as required
under the relevant Ind AS.
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TOPIC 6
BUSINESS COMBINATION(IND AS 103)
QUESTION 1 (V.V.IMP)

(MTP 1 VIDEO MARCH 2019)

(TIMING IN VIDEO: 01:49:07 minutes) (20marks)
(Question number in mtp: 1A)

H Ltd. acquired equity shares of S Ltd, a listed company, in two tranches an

mentioned in the below table:
Date Equity stake Remarks
purchased
1st November, 15% The shares were purchased based on The
2016 quoted price on the stock exchange on the
stock exchange on the relevant dates.
1st January, 2017 45%
Both the above-mentioned companies have INR as their functional currency.
Consequently, H Ltd acquired control over S Ltd. on 1st January, 2017 Following is
the Balance Sheet of S Ltd. as on the date:
Particulars Carrying value Fair value (Rs.
(Rs. In crores) In crore)
ASSETS:
Non-current assets
(a) Property, plant and equipment 40.0 90.0
(b) Intangible assets 20.0 30.0
(c) Financial assets 100.0 350.0
Investments
20.0 20.0
Current assets
(a) Inventories
(b) Financial assets 20.0 20.0
4.0 4.5
-Trade receivables
Cash held in functional currency
4.0 4.5
(C) Other Current assets
Non-current asset held for sale
TOTLA ASSETS 208
EQUITY AND LIABILITES
Equity
(a) Share capital (face value Rs.100) 12.0 50.4
(b) Other equity 141.0 Not applicable
(c) Non-current liabilities
caparveenjindal.com/lms 32

(a) Financial liabilities

-Borrowings 20.0 20.0
Current Liabilities
(a) Financial liabilities
-Trade payables 28.0 28.0
3.0 3.0
(b) Provision for warranties
4.0 4.0
(c) Current tax liabilities

TOTAL EQUITY AND LIABITIES 208.0

Other information:
Property, plant and equipment in the above Balance sheet include leasehold motor
vehicles having carrying value of Rs. 1 crore and fair value of Rs. 1.2 crore. The
date of inception of the lease was 1st April, 2010. On the inception of the lease,
S Ltd. Had correctly classified the lease as a financed lease. However, if facts
and circumstances as on 1st April, 2017 are considered, the lease would be
classified as an operating lease.
Following is the statement of contingent liabilities of S Ltd. As on 1st January,
2017:
Particulars Fair value Remarks
(Rs. In crore)
Law suit filed by a customer for 0.5 It is not probable that an outflow
a claim of Rs. 2 crore of resources embodying economic
benefits will be required to settle
the claim.
Any amount which would be paid
in respect of law suit will be tax
deductible
Income tax demand of Rs. 7 2.0 It is not probable that an outflow
crore raised by tax authorities of resources embodying economic
;S Ltd. Has challenged the benefits will be required to settle
demand in the court. the claim.
In relation to the above-mentioned contingent liabilities, S Ltd has given an
indemnification undertaking to H Ltd up to a maximum of Rs 1 crore.
Rs. 1 crore represents the acquisition date fair value of the indemnification
undertaking.
Any amount which would be received in respect of the above undertaking shall not
be taxable.
The tax bases of the assets and liabilities of S Ltd. is equal to their respective
carrying values carrying values being recognized in its Balance Sheet.
Carrying value of non-current asset held for sale of Rs. 4 crore represents its
fair value less cost to sell in accordance with the relevant Ind AS.
In consideration of the additional stake purchases by H Ltd. On 1st January, 2017
it has issued to the selling shareholders of S Ltd. 1 equity share of H Ltd. Fore
caparveenjindal.com/lms 33

every 2 shares held in S Ltd. Fair value of equity shares of H Ltd. as on 1 st

January, 2017 is Rs. 10,000 per share.
On 1st January, 2017 H Ltd. Has paid Rs. 50 core in cash to the selling
shareholders of S Ltd. Additionally. On 31st March, 2019 H Ltd. Will pay Rs. 30
crore to the selling shareholders of S Ltd. If return on equity of S ltd. For the
year ended 31st March, 2019 is more than 25% per annum, H Ltd has estimated
the fair value of this obligation as on 1st January, 2017 and 31st March, 2017 as
Rs 22 core and Rs 23 crore respectively. The change in fair value of the obligation
is attributable to the change in in fair value of the obligation is attributable to
the change in facts and circumstances after the acquisition date.
Quoted price of equity shares of S Ltd. as on various dates is as follows:
AS on November, 2016 Rs. 350 per share
st
As on 1 January, 2017 Rs. 395 per share
st
AS on 31 March, 2017 Rs 420. Per share
st
On 31 May, 2017 H Ltd. learned that certain customer relationship existing as
on 1st January, 2017 which met the recognition criteria of an intangible asset as
on that date were not considered during the accounting of business combination
for the year ended 31st March, 2017. The fair value of such customer relationship
as on 1st January, 2017 was Rs. 3.5 crore (assume that there are no temporary
differences associated with customer relations).
On 31st May, 2017 itself, H Ltd further learned that due to additional customer
relationship being developed during the period 1st January, 2017 to 31st March,
2017 the fair value of such customer relationship has increased to Rs. 4 crore as
on 31st march, 2017
On 31st December, 2017 H Ltd has established that is has obtained all the
information necessary for the accounting of the business combination and the
more information is not obtainable
H Ltd. and S Ltd are not related parties and follow Ind AS for financial reporting
income tax rate applicable is 30%
You are required to provide your detailed responses to the following along with
reasoning and computation notes:
(a) What should be the goodwill or bargain purchase gain to be recognized by H Ltd.
In its financial statements for the year ended 31st March, 2017 for this purpose.
Measure non-controlling interest using proportionate share of the fair value of
the identifiable net assets of S Ltd.
(b) What the amount of non-controlling interest. goodwill, or bargain purchase gain
so recognized in (a) above change subsequent to 31st March. 2017? If yes. Provide
journal entries.
(c) What should be the accounting treatment of the contingent consideration as on
31st March, 2017?
caparveenjindal.com/lms 34

QUESTION 2 (V.V.IMP)

(MTP 2 VIDEO APRIL 2019)

(TIMING IN VIDEO: 00:15:29) (20marks)
(Question number in mtp: 1)

The balance sheet of P Ltd. and D Ltd. as of 31st March, 20X2 is given below:
Assets P Ltd. D Ltd.

Non-Current Assets:
Property, plant and equipment 300 500
Investment 400 100
Current assets:

inventories 250 150

Financial assets
Trade receivables 450 300
Cash and cash equivalents 200 100
Others 400 230
Total 2,000 1,380

Equity and Labilities

Equity
Share capital equity shares of Rs 100 each 500 400
Other Equity 810 225
Non-Current liabilities:
Long term borrowings 250 200
Long term provisions 50 70
Deferred tax 40 35
Current Liabilities:
Short term borrowings 100 150
Trade payables 250 300
Total 2,000 1,380

Other information
(a) P Ltd. acquired 70% shares of D Ltd. on 1St April, 20X2 by issuing its own shares
in the ratio of 1 share of P Ltd. for every 2 shares of D Ltd. The fair value of the
shares of P Ltd. was Rs. 40 per share.
(b) The fair value exercise resulted in the following: (all nos in Lakh)
caparveenjindal.com/lms 35

a. Fair value of PPE on 1st April, 20X2 was Rs. 350 lakh.
b. P Ltd. also agreed to pay an additional payment as consideration that is higher
of 35 lakh and 25% of any excess profits in the first year, after acquisition,
over its profits in the preceding 12 months made by D Ltd, this additional
amount will be due after 2 years, D Ltd. has earned Rs. 10 lakh profit in the
preceding year and expects to earn another Rs. 20 Lakh.
c. In addition to above, P Ltd also had agreed to pay one of the founder
shareholder a payment of Rs. 20 lakh provided he stays with the Company for
two year after the acquisition.
d. D Ltd. had certain equity settled share based payment award (original award)
which got replace by the new award issued by P Ltd. As per the original team
the vesting period was 4 years and as of the acquisition date the employees of
D Ltd. have already served 2 years of service As per the replace awards the
vesting period has been reduced to one year (one year from the acquisition
date). The fair value of the award on the acquisition date was as follows:
i. Original award Rs.5 lakh
ii. Replacement award Rs. 8 lakh
e. D Ltd had a lawsuit pending with a customer who had made a claim of Rs 50
lakh, management reliably estimated the fair value of liability to be Rs. 5 lakh.
f. The applicable tax rate for both entities is 30%
You are required to prepare opening consolidated balance sheet of P Ltd. as on 1st April,
20X2 Assume 10% discount rate.

QUESTION 3

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 00:55:51)
(Question number in rtp: 3)

How should contingent consideration payable in relation to a business combination

be accounted for on initial recognition and at the subsequent measurement as per
Ind AS in the following cases:
(i) On 1 April 2016, A Ltd. acquires 100% interest in B Ltd. As per the terms of
agreement the purchase consideration is payable in the following 2 tranches:
a. an immediate issuance of 10 lakhs shares of A Ltd. having face value of
INR 10 per share;
b. a further issuance of 2 lakhs shares after one year if the profit before
interest and tax of B Ltd. for the first year following acquisition exceeds
INR 1 crore.
caparveenjindal.com/lms 36

i. The fair value of the shares of A Ltd. on the date of acquisition is

INR 20 per share. Further, the management has estimated that on
the date of acquisition, the fair value of contingent consideration
is ₹25 lakhs.
ii. During the year ended 31 March 2017, the profit before interest
and tax of B Ltd. exceeded ₹1 crore. As on 31 March 2017, the fair
value of shares of A Ltd. is ₹25 per share.
(ii) Continuing with the fact pattern in (a) above except for:
c. The number of shares to be issued after one year is not fixed.
d. Rather, A Ltd. agreed to issue variable number of shares having a fair
value equal to ₹40 lakhs after one year, if the profit before interest and
tax for the first year following acquisition exceeds ₹1 crore. A Ltd.
issued shares with ₹40 lakhs after a year.
QUESTION 4 (MIXED WITH IND AS 38)

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 02:29:47)
(Question number in rtp: 10)

As part of its business expansion strategy, KK Ltd. is in process of setting up a

pharma intermediates business which is at very initial stage. For this purpose, KK
Ltd. has acquired on 1st April, 2018, 100% shares of ABR Ltd. that manufactures
pharma intermediates. The purchase consideration for the same was by way of a
share exchange valued at ₹ 35 crores. The fair value of ABR Ltd.' s net assets was
₹ 15 crores, but does not include:
(i) A patent owned by ABR Ltd. for an established successful intermediate drug
that has a remaining life of 8 years. A consultant has estimated the value of
this patent to be ₹ 10 crores. However, the outcome of clinical trials for the
same are awaited. If the trials are successful, the value of the drug would
fetch the estimated ₹ 15 crores.
(ii) ABR Ltd. has developed and patented a new drug which has been approved for
clinical use. The cost of developing the drug was ₹ 12 crores. Based on early
assessment of its sales success, the valuer has estimated its market value at
₹ 20 crores.
(iii) ABR Ltd.'s manufacturing facilities have received a favourable inspection by
a government department. As a result of this, the Company has been granted
an exclusive five-year license to manufacture and distribute a new vaccine.
Although the license has no direct cost to the Company, its directors believe
that obtaining the license is a valuable asset which assures guaranteed sales
and the value for the same is estimated at ₹ 10 crores.
caparveenjindal.com/lms 37

KK Ltd. has requested you to suggest the accounting treatment of the

above transaction under applicable Ind AS.

QUESTION 5

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 02:29:43)
(Question number in Rtp: 19)

Veera Limited and Zeera Limited are both in the business of manufacturing and
selling of Lubricant. Veera Limited and Zeera Limited shareholders agree to join
forces to benefit from lower delivery and distribution costs. The business
combination is carried out by setting up a new entity called Meera Limited that
issues 100 shares to Veera Limited’s shareholders and 50 shares to Zeera Limited’s
shareholders in exchange for the transfer of the shares in those entities. The
number of shares reflects the relative fair values of the entities before the
combination. Also respective company’s shareholders gets the voting rights in
Meera Limited based on their respective shareholding.
Determine the acquirer by applying the principles of Ind AS 103 ‘Business
Combinations’.

QUESTION 6 (MIXED WITH IND AS 21)

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 00:49:20)
(Question number in Rtp: 17)

Monsoon Limited acquired, on 30 September, 20X2, 70% of the share capital of

Mark Limited, an entity registered as company in Germany. The functional currency
of Monsoon Limited is Indian Rupee and its financial year ends on 31 March, 20X3.
The fair value of the net assets of Mark Limited was 23 million EURO and the
purchase consideration paid is 17.5 million EURO on 30 September, 20X2.
The exchange rates as on 30 September, 20X2 was ₹ 82 per EURO and at 31 March,
20X3 was ₹ 84 per EURO.
On acquisition of Mark limited, what is the value at which the goodwill /
capital reserve has to be recognized in the financial statements of Monsoon
Limited as on 31 March 20X3?
caparveenjindal.com/lms 38

QUESTION 7

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 01:19:42)
(Question number in Rtp: 13)

Bima Ltd. acquired 65% of shares on 1 June, 20X1 in Nafa Ltd. which is engaged in
production of components of machinery. Nafa Ltd. has 1,00,000 equity shares of ₹
10 each. The quoted market price of shares of Nafa Ltd. was ₹ 12 on the date of
acquisition. The fair value of Nafa Ltd.'s identifiable net assets as on 1 June, 20X1
was ₹ 80,00,000.
Bima Ltd. wired ₹ 50,00,000 in cash and issued 50,000 equity shares as purchase
consideration on the date of acquisition. The quoted market price of shares of Bima
Ltd. on the date of issue was ₹ 25 per share.
Bima Ltd. also agrees to pay additional consideration of ₹ 15,00,000, if the
cumulative profit earned by Nafa Ltd. exceeds ₹ 1 crore over the next three years.
On the date of acquisition, Nafa Ltd. assessed and determined that it is considered
probable that the extra consideration will be paid. The fair value of this
consideration on the date of acquisition is ₹ 9,80,000. Nafa Ltd. incurred ₹ 1,50,000
in relation to the acquisition. It measures Non-controlling interest at fair value.
How will the acquisition of Nafa Ltd. be accounted by Bima Ltd., under Ind
AS 103? Prepare detailed workings and pass the necessary journal entry.

QUESTION 8

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 02:56:32)
(Question number in Rtp: 1)

Company X is engaged in the business of exploration & development of Oil & Gas
Blocks.
Company X currently holds participating interest (PI) in below mentioned producing
Block as follows:

Block Name Company X Company Y Company Z Total

AWM/01 30% 60% 10% 100%
For the above Block, Company X, Y & Z has entered into unincorporated Joint
Venture.
Company Y is the Operator of the Block AWM/01. Company X & Company Z are the
Joint Operators. Company Y incurs all the expenditure on behalf of Joint Venture
and raise cash call to Company X & Company Z at each month end in respect of their
caparveenjindal.com/lms 39

share of expenditure incurred in Joint Venture. All the manpower and requisite
facilities / machineries owned by the Joint venture and thereby owned by all the
Joint Operators.
For past few months, due to liquidity issues, Company Z defaulted in payment of
cash calls to operators. Therefore, company Y (Operator) has issued notice to
company Z for withdrawal of their participating right from on 01.04.20X1. However,
company Z has filed the appeal with arbitrator on 30.04.20X1.
Financial performance of company Z has not been improved in subsequent months
and therefore company Z has decided to withdraw participating interest rights
from Block AWM/01 and entered into sale agreement with Company X & Company
Y. As per the terms of the agreement, dated 31.5.20X1, Company X will receive
33.33% share & Company Y will receive 66.67% share of PI rights owned by Company
Z.
Company X is required to pay ₹1 Lacs against 33.33% share of PI rights owned by
Company Z.
After signing of sale agreement, Operator (company Y) approach government of
India for modification in PSC (Production Sharing Contract) i.e. removal of Company
Z from PSC of AWM/01 and government has approved this transaction on
30.6.20X1. Government approval for the modification in PSC is essential given the
industry in which the joint-operators operate.
Balance sheet of Company X & Company Z are as follows:
Particulars Company X Company Z
31.5.20X1 30.6.20X1 31.5.20X1 30.6.20X1

₹ ₹ ₹ ₹
Assets
Non-Current Assets
Property, Plant & 5,00,000 10,00,000 1,50,000 3,00,000
Equipment
Right of Use Asset 1,00,000 2,00,000 10,000 20,000
Development CWIP 50,000 1,00,000 50,000 1,00,000
Financial Assets
Loan receivable 25,000 50,000 25,000 50,000

Total Non-Current 6,75,000 13,50,000 2,35,000 4,70,000

Assets
Current assets
Inventories 1,00,000 2,00,000 15,000 30,000
caparveenjindal.com/lms 40

Financial Assets
Trade receivables 1,50,000 3,00,000 50,000 1,00,000
Cash and cash 2,00,000 4,00,000 1,00,000 2,00,000
equivalents
Other Current Assets 2,25,000 50,000 25,000 50,000
Total Current Assets 6,75,000 9,50,000 1,90,000 3,80,000

Total Assets 13,50,000 23,00,000 4,25,000 8,50,000

Equity and Liabilities
Equity
Equity share capital 3,00,000 3,00,000 1,00,000 1,00,000
Other equity 2,00,000 3,00,000 75,000 2,50,000

Total Equity 5,00,000 6,00,000 1,75,000 3,50,000

Liabilities
Non-Current Liabilities
Provisions 4,00,000 8,00,000 1,00,000 2,00,000
Other Liabilities 1,50,000 3,00,000 50,000 1,00,000

Total Non-Current 5,50,000 11,00,000 1,50,000 3,00,000

Liabilities

Current Liabilities

Financial Liabilities
Trade Payables 3,00,000 6,00,000 1,00,000 2,00,000

Total Current 3,00,000 6,00,000 1,00,000 2,00,000

Liabilities

Total Liabilities 13,50,000 23,00,000 4,25,000 8,50,000

Additional Information:
1. Fair Value of PPE & Development CWIP owned by Company Z as per Market
participant approach is ₹ 5,00,000 & ₹ 2,00,000 respectively.
2. Fair Value of all the other assets and liabilities acquired are assumed to be at
their carrying values (except cash & cash equivalents). Cash and cash
equivalents of Company Z are not to be acquired by Company X as per the
terms of agreement.
3. Tax rate is assumed to be 30%.
4. As per Ind AS 28, all the joint operators are joint ventures whereby each
parties that have joint control of the arrangement have rights to the net
caparveenjindal.com/lms 41

assets of the arrangement and therefore every operator records their share
of assets and liabilities in their books.
You need to determine the following:
1. Whether the above acquisition falls under business or asset acquisition as
defined under business combination standard Ind AS 103?
2. Determine the acquisition date in the above transaction.
3. Prepare Journal entries for the above-mentioned transaction.
4. Draft the Balance Sheet for Company X based on your analysis in Part 1
above as at acquisition date.

QUESTION 9

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 01:46:23)
(Question number in Rtp: 9)

Entity A acquires entity B. Entity A agrees with the former shareholders of entity
B to pay ₹ 900, with an additional payment of ₹ 500 if the subsequent earnings of
entity B reach a specified target in three years. The former shareholders also
become employees. On the acquisition date, the fair value of the net assets of
entity B amount to ₹ 850, and the fair value of additional payment is estimated at
₹ 200. At the acquisition date, the outflow of additional payment is not probable.
Over the next three years, the cumulative earnings of entity B (before considering
the effects of the additional payments) amount to ₹ 1,050. At the end of year
three, entity A pays ₹ 500 as the conditions were met.
State the impact on the financial position and results of classifying the payments
as remuneration and contingent consideration.
caparveenjindal.com/lms 42

TOPIC 7
CASH FLOW STATEMENT (IND AS 7)
QUESTION 1 (V.V.IMP)

(MTP 3 VIDEO OCTOBER 2019)

(TIMING IN VIDEO: 00:14:31 minutes) (6marks)
(Question number in mtp: 4B)

A Ltd. whose functional currency is Indian Rupee, had a balance of cash and cash
equivalents of Rs. 2,00,000 but there are no trade receivables or trade payables balances
as on 1st April, 20X1 During the year 20X1-20X2, the entity entered into the following
foreign currency transactions.
 A Ltd. purchased goods for resale from Europe for $2,00,000 when the exchange
rate was €1=Rs 50. This balance is still unpaid at 31st March 20X2 when the
exchange rate is €1= Rs 45 An exchange gain on retranslation of the trade payable
of Rs. 5,00,000 is recorded in profit or loss.
 A Ltd sold the good to an American client for $ 150,000 when the exchange rate
was $1= Rs. 40 This amount was settled when the exchange rate was $1 Rs 42.
further exchange gain regarding the trade regarding is recoded in the statements
of profit or loss.
 At Ltd. also borrowed $ 1,00,000 under a long-term agreement when the exchange
rate was $1=Rs-50 and immediately converted is to Rs 50,00,000. The loan was
retranslated at 31st March, 20X2 @ Rs 45, with a further exchange gain recorded
in the statement of profit of loss.
 A Ltd, therefore records a cumulative exchange gain of Rs 18,00,000
(10,00,000+3,00,000+ 5,00,000) in arriving at its profit for the year.
 In addition. At Ltd. records a gross profit of Rs 10,00,000 (Rs.s 60,00,000- Rs
50,00,000) on the sale of the goods.
 Ignore taxation.
How cash flows arising from the above transactions would be reported in the statement
of cash flows of A Ltd. under indirect method?
caparveenjindal.com/lms 43

QUESTION 2

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 03:26:59)
(Question number in rtp: 17)

Z Ltd. has no foreign currency cash flow for the year 2017. It holds some deposit
in a bank in the USA. The balances as on 31.12.2017 and 31.12.2018 were US$
100,000 and US$ 102,000 respectively. The exchange rate on December 31, 2017
was US$1 = ₹ 45. The same on 31.12.2018 was US$1 = ₹ 50. The increase in the
balance was on account of interest credited on 31.12.2018. Thus, the deposit was
reported at ₹ 45,00,000 in the balance sheet as on December 31, 2017. It was
reported at ₹ 51,00,000 in the balance sheet as on 31.12.2018. How these
transactions should be presented in cash flow for the year ended 31.12.2018 as per
Ind AS 7?

QUESTION 3

(RTP VIDEO NOV. 2019)

(TIMING IN VIDEO: 00:45:57)
(Question number in Rtp: 16)

Following is the balance sheet of Kuber Limited for the year ended 31st March, 20X2
(₹ in lacs)

20X2 20X1
ASSETS
Non-current Assets
Property, plant and equipment 13,000 12,500
Intangible assets 50 30
Other financial assets 145 170
Deferred tax asset (net) 855 750
Other non-current assets 800 770
Total non-current assets 14,850 14,220
Current assets
Financial assets
Investments 2,300 2,500
caparveenjindal.com/lms 44

Cash and cash equivalents 220 460

Other current assets 195 85
Total current assets 2,715 3,045
Total Assets 17,565 17,265
EQUITY AND LIABILITIES
Equity
Equity share capital 300 300
Other equity 12,000 8,000

Total equity 12,300 8,300

Liabilities
Non-current liabilities
Long-term borrowings 2,000 5,000
Other non-current liabilities 2,740 3,615
Total non-current liabilities 4,740 8,615
Current liabilities
Financial liabilities
Trade payables 150 90
Bank Overdraft 75 60
Other current liabilities 300 200

Total current liabilities 525 350

Total liabilities 5,265 8,965

Total Equity and Liabilities 17,565 17,265
Additional Information:
(1) Profit after tax for the year ended 31st March, 20X2- ₹ 4,450 lacs
(2) Interim Dividend paid during the year - ₹ 450 lacs
(3) Depreciation and amortisation charged in the statement of profit and loss
during the current year are as under
(a) Property, Plant and Equipment - ₹ 500 lacs
(b) Intangible Assets - ₹ 20 lacs
(4) During the year ended 31st March, 20X2 two machineries were sold for ₹ 10
lacs. The carrying amount of these machineries as on 31st March, 20X2 is ₹
60 lacs.
(5) Income taxes paid during the year ₹ 105 lacs
caparveenjindal.com/lms 45

Using the above information of Kuber Limited, construct a statement of

cash flows under indirect method. Other non-current / current assets and
liabilities are related to operations of Kuber Ltd. and do not contain any
element of financing and investing activities.

QUESTION 4

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 00:18:21)
(Question number in rtp: 2)

Entity A acquired a subsidiary, Entity B, during the year. Summarised information

from the Consolidated Statement of Profit and Loss and Balance Sheet is provided,
together with some supplementary information.

Consolidated Statement of Profit and Loss Amount

(₹)

Revenue 3,80,000
Cost of sales (2,20,000)

Gross profit 1,60,000

Depreciation (30,000)
Other operating expenses (56,000)
Interest cost (4,000)
Profit before taxation 70,000
Taxation (15,000)
Profit after taxation 55,000

Consolidated balance sheet 20X2 20X1

Assets Amount Amount

(₹) (₹)

Cash and cash equivalents 8,000 5,000

Trade receivables 54,000 50,000
caparveenjindal.com/lms 46

Inventories 30,000 35,000

Property, plant and equipment 1,60,000 80,000
Goodwill 18,000 —
Total assets 2,70,000 1,70,000
Liabilities
Trade payables 68,000 60,000
Income tax payable 12,000 11,000
Long term debt 1,00,000 64,000
Total liabilities 1,80,000 1,35,000
Shareholders’ equity 90,000 35,000

Total liabilities and shareholders’ 2,70,000 1,70,000

Other information
All of the shares of entity B were acquired for ₹ 74,000 in cash. The fair values of
assets acquired and liabilities assumed were:

Particulars Amount
(₹)

Inventories 4,000
Trade receivables 8,000
Cash 2,000
Property, plant and equipment 1,10,000
Trade payables (32,000)
Long term debt (36,000)
Goodwill 18,000

Cash consideration paid 74,000

Prepare the Consolidated Statement of Cash Flows for the year 20X2, as per Ind
AS 7.

QUESTION 5

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 02:35:46)
(Question number in Rtp: 18)
caparveenjindal.com/lms 47

During the financial year 2019-2020, Akola Limited have paid various taxes & reproduced
the below mentioned records for your perusal:
- Capital gain tax of ₹ 20 crore on sale of office premises at a sale consideration
of ₹ 100 crore.
- Income Tax of ₹ 3 crore on Business profits amounting ₹ 30 crore (assume
entire business profit as cash profit).
- Dividend Distribution Tax of ₹ 2 crore on payment of dividend amounting ₹ 20
crore to its shareholders.
- Income tax Refund of ₹ 1.5 crore (Refund on taxes paid in earlier periods for
business profits).
You need to determine the net cash flow from operating activities,
investing activities and financing activities of Akola Limited as per relevant Ind
AS.

QUESTION 6

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 00:06:55)
(Question number in Rtp: 3)

From the following data of Galaxy Ltd., prepare statement of cash flows showing
cash generated from Operating Activities using direct method as per Ind AS 7:

31.3.20X2 31.3.20X1
(₹) (₹)

Current Assets:
Inventory 1,20,000 1,65,000
Trade receivables 2,05,000 1,88,000
Cash & cash equivalents 35,000 20,500
Current Liabilities:
Trade payable 1,95,000 2,15,000
Provision for tax 48,000 65,000

Summary of Statement of Profit and Loss ₹

Sales 85,50,000
Less: Cost of sales (56,00,000) 29,50,000

Other Income
caparveenjindal.com/lms 48

Interest income 20,000

Fire insurance claim received 1,10,000 1,30,000
30,80,000
Depreciation (24,000)
Administrative and selling expenses (15,40,000)
Interest expenses (36,000)
Foreign exchange loss (18,000) (16,18,000)

Net Profit before tax and extraordinary income 14,62,000

Income Tax (95,000)
Net Profit 13,67,000

Additional information:
(i) Trade receivables and Trade payables include amounts relating to credit sale
and credit purchase only.
(ii)Foreign exchange loss represents increment in liability of a long-term
borrowing due to exchange rate fluctuation between acquisition date and
balance sheet date

QUESTION 7

(RTP VIDEO NOV. 2022)

(TIMING IN VIDEO: 03:29:50)
(Question number in Rtp: 11)

What will be the classification for following items in the statement of cash flows
of both (i) Banks / Financial institutions and (ii) Other Entities?

S. Particulars
No.
1. Interest received on loans and advances given
2. Interest paid on deposits and other borrowings

3. Interest and dividend received on investments in subsidiaries, associates

and in other entities
4. Dividend paid on preference and equity shares, including tax on dividend
paid on preference and equity shares by other entities
5. Finance charges paid by lessee under finance lease

6. Payment towards reduction of outstanding finance lease liability

caparveenjindal.com/lms 49

7. Interest paid to vendor for acquiring fixed asset under deferred payment
basis
8. Principal sum payment under deferred payment basis for acquisition of
fixed assets
9 Penal interest received from customers for late payments

10. Penal interest paid to suppliers for late payments

11. Interest paid on delayed tax payments
12. Interest received on tax refunds
caparveenjindal.com/lms 50

TOPIC 8
PROPERTY,PLANT & EQUIPMENT (IND AS 16)

QUESTION 1

(MTP 4 VIDEO MAY 2020)

(TIMING IN VIDEO: 00:02:03) (12 marks)
(Question number in mtp: 1a)

Flywing Airways Ltd.is a company which manufactures aircraft parts and engines and sells
them to large multinational companies like Boeing and Airbus Industries.
On 1 April 20X1, the company began the construction of a new production line in its
aircraft parts manufacturing shed.
Costs relating to the production line are as follows:
Details Amount
Rs.’000

Costs of the basic materials (list price Rs. 12.5 million less a 20% trade
discount) 10,000
Recoverable goods and services taxes incurred not included in the
purchase cost 1,000
Employment cost of the construction staff for the three months to 30
June 20X1 1,200
Other overheads directly related to the construction 900
Payments to external advisors relating to the construction 500
Expected dismantling and restoration cost 2,000

Additional Information
The construction staff was engaged in the production, line which took two months to
make ready for use and was bought into use on 31 May, 20X1.
The other overheads were incurred in the two months period ended on 31 may 20X1. They
include an abnormal cost of Rs. 3,00,000 caused by a Major electrical fault.

The production line is expected to have a useful economic like of eight years. At the end
of that time Flywing Airways Ltd is legally required to dismantle the plant in a specified
manner and restore its location to an acceptable standard. The amount of Rs.2 million
caparveenjindal.com/lms 51

mentioned above is the amount that is expected to be incurred at the end of the useful
life of the production line. The appropriate rate to use in any discounting calculations is
5% the present value of Rs 1 payable in eight years at a discount rate of 5% is
approximately Re.0.68.

Four years after being brought into use, the production line will require a major overhaul
to ensure that it generates economic benefits for the second half of its useful life. The
estimated cost of the overhaul, at current prices, is Rs. 3 million.
The Company computes its depreciation charge on a monthly basis.
No impairment of the plant had occurred by31 March, 20X2.
Analyze the accounting implications of cost related to production line to be recognized
in the balance sheet and profit & loss for the year ended march X2.

QUESTION 2

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 03:28:20)
(Question number in rtp: 19)

Company X performed a revaluation of all of its plant and machinery at the beginning
of 2018-2019. The following information relates to one of the machinery:
Amount (‘000)
Gross carrying amount ₹ 200
Accumulated depreciation (straight-line method) ₹ 80
Net carrying amount ₹ 120

Fair value ₹ 150

The useful life of the machinery is 10 years and the company uses Straight line
method of depreciation. The revaluation was performed at the end of the 4th year.
How should the Company account for revaluation of plant and machinery and
depreciation subsequent to revaluation?

QUESTION 3

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 00:39:47)
(Question number in rtp: 4)
caparveenjindal.com/lms 52

Company X performed a revaluation of all of its plant and machinery at the beginning
of 20X1. The following information relates to one of the machinery:
Amount (‘000)
Gross carrying amount ₹ 200
Accumulated depreciation (straight-line method) (₹ 80)

Net carrying amount ₹ 120

Fair value ₹ 150
The useful life of the machinery is 10 years and the company uses Straight line
method of depreciation. The revaluation was performed at the end of 4 years.
How should the Company account for revaluation of plant and machinery and
depreciation subsequent to revaluation? Support your answer with journal entries.

QUESTION 4 (VERY GOOD QUESTION)

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 03:04:15)
(Question number in Rtp: 15)

Entity X has a warehouse which is closer to factory of Entity Y and vice versa. The
factories are located in the same vicinity. Entity X and Entity Y agree to exchange
their warehouses. The carrying value of warehouse of Entity X is ₹ 1,00,000 and its
fair value is ₹ 1,25,000. It exchanges its warehouse with that of Entity Y, the fair
value of which is ₹ 1,20,000. It also receives cash amounting to ₹ 5,000. How should
Entity X account for the exchange of warehouses?

QUESTION 5

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 02:27:51)
(Question number in Rtp: 6)

An entity has the following items of property, plant and equipment:

• Property A — a vacant plot of land on which it intends to construct its new
administration headquarters;
• Property B — a plot of land that it operates as a landfill site;
• Property C — a plot of land on which its existing administration headquarters
are built;
caparveenjindal.com/lms 53

• Property D — a plot of land on which its direct sales office is built;

• Properties E1–E10 — ten separate retail outlets and the land on which they
are built;
• Equipment A — computer systems at its headquarters and direct sales office
that are integrated with the point of sale computer systems in the retail
outlets;
• Equipment B — point of sale computer systems in each of its retail outlets;
• Furniture and fittings in its administrative headquarters and its sales office;
• Shop fixtures and fittings in its retail outlets.
How many classes of property, plant and equipment must the entity disclose?

QUESTION 6

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 04:32:50)
(Question number in Rtp: 20)

Heaven Ltd. had purchased a machinery on 1.4.2X01 for ₹ 30,00,000, which is

reflected in its books at written down value of ₹ 17,50,000 on 1.4.2X06. The
company has estimated an upward revaluation of 10% on 1.4.2X06 to arrive at the
fair value of the asset. Heaven Ltd. availed the option given by Ind AS of
transferring some of the surplus as the asset is used by an enterprise.
On 1.4.2X08, the machinery was revalued downward by 15% and the company also
re- estimated the machinery’s remaining life to be 8 years. On 31.3.2 X10 the
machinery was sold for ₹ 9,35,000. The company charges depreciation on straight
line method.
Prepare machinery account in the books of Heaven Ltd. over its useful life to record
the above transactions.

QUESTION 7

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 03:54:25)
(Question number in Rtp: 20)

On 1st January, 20X1 an entity purchased an item of equipment for ₹ 600,000,

including ₹ 50,000 refundable purchase taxes. The purchase price was funded by
raising a loan of ₹ 605,000. In addition, the entity has to pay ₹ 5,000 in loan raising
fees to the Bank. The loan is secured against the equipment.
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In January 20X1 the entity incurred costs of ₹ 20,000 in transporting the

equipment to the entity’s site and ₹ 100,000 in installing the equipment at the site.
At the end of the equipment’s 10-year useful life the entity is required to dismantle
the equipment and restore the building housing the equipment. The present value
of the cost of dismantling the equipment and restoring the building is estimated to
be ₹ 100,000.
In January 20X1 the entity’s engineer incurred the following costs in modifying the
equipment so that it can produce the products manufactured by the entity:
• Materials – ₹ 55,000
• Labour – ₹ 65,000
• Depreciation of plant and equipment used to perform the modifications – ₹
15,000
In January 20X1, the entity’s production staff were trained in how to operate the
new item of equipment. Training costs included:
• Cost of an expert external instructor – ₹ 7,000
• Labour – ₹ 3,000
In February 20X1 the entity’s production team tested the equipment and the
engineering team made further modifications necessary to get the equipment to
function as intended by management. The following costs were incurred in the
testing phase:
• Materials, net of ₹ 3,000 recovered from the sale of the scrapped output – ₹
21,000
• Labour – ₹ 16,000
The equipment was ready for use on 1st March, 20X1. However, because of low
initial order levels the entity incurred a loss of ₹ 23,000 on operating the equipment
during March. Thereafter the equipment operated profitably.
What is the cost of the equipment at initial recognition?
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TOPIC 9
IMPAIRMENT (IND AS 36)

QUESTION 1

(MTP 5 VIDEO OCTOBER 2020)

(TIMING IN VIDEO: 00:08:07) (5 marks)
(Question number in mtp: 2a)

PQR Ltd. is the company which has performed will in the past but one of its major assets
an item of equipment, Suffered a significant and unexpected deterioration in
performance. Management expects to use the machine for a further four years after
31st March 2020, but at a reduced level. The equipment will be scrapped after four years.
The financial accountant for PQR Limited has produced a set of cash flow projections
for the equipment for the next four years, ranging from optimistic to pessimistic. CFO
thought that the projection were too conservative, and he intended to use the highest
figures each year. These were as follows:
`

Year ended 31 March 2021 2,76,000

Year ended 31 March 2022 1,92,000
Year ended 31 March 2023 1,20,000
Year ended 31 March 2024 1,14,000

The above cash inflows should be assumed to occur on the last day of each financial year.
The pre-tax discount rate is 9% The machine could have been sold at 31 March 2020 for
Rs 6,00,000 and related selling expenses in this regard could have been ` 96,000. The
machine was revalued previously, and at 31 March 2020 an amount of ` 36,000 was held
in revaluation surplus in respect of the asset The carrying value of the asset at 31 March
2020 was ` 6,60,000 The Indian government has indicated that it may compensate the
company for any loss in value of the assets up to its recoverable amount.

QUESTION 2
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(MTP 10 VIDEO APRIL 2022)

(TIMING IN VIDEO: 00:42:17) (6marks)
(Question number in mtp: 6C)

On 1st April, 20X1, Sun Ltd. has acquired 100% shares of Earth Ltd. for ` 30 lakh.
Sun Ltd. has 3 cash-generating units A, B and C with fair value of ` 12 lakh, ` 8
lakh and ` 4 lakh respectively. The company recognizes goodwill of ` 6 lakh that
relates to CGU ‘C’ only.

During the financial year 20X2-20X3, the CFO of the company has a view that
there is no requirement of any impairment testing for any CGU since their
recoverable amount is comparatively higher than the carrying amount and believes
there is no indicator of impairment.

Analyse whether the view adopted by the CFO of Sun Ltd. is in compliance with
the Ind AS. If not, advise the correct treatment in accordance with relevant
Ind AS.

QUESTION 3

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 00:00:47)
(Question number in rtp: 1)

Elia limited is a manufacturing company which deals in to manufacturing of cold

drinks and beverages. It is having various plants across India. There is a Machinery
A in the Baroda plant which is used for the purpose of bottling. There is one more
machinery which is Machinery B clubbed with Machinery A. Machinery A can
individually have an output and also sold independently in the open market.
Machinery B cannot be sold in isolation and without clubbing with Machine A it
cannot produce output as well. The Company considers this group of assets as a Cash
Generating Unit and an Inventory amounting to ₹ 2 Lakh and Goodwill amounting to
₹ 1.50 Lakhs is included in such CGU.
Machinery A was purchased on 1st April 2013 for ₹ 10 Lakhs and residual value is ₹
50 thousands. Machinery B was purchased on 1st April, 2015 for ₹ 5 Lakhs with no
residual value. The useful life of both Machine A and B is 10 years. The Company
expects following cash flows in the next 5 years pertaining to Machinery A. The
incremental borrowing rate of the company is 10%.

Year Cash Flows from Machinery A

1 1,50,000
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2 1,00,000
3 1,00,000
4 1,50,000
5 1,00,000 (excluding Residual Value)
Total 6,00,000

On 31st March, 2018, the professional valuers have estimated that the current
market value of Machinery A is ₹ 7 lakhs. The valuation fee was ₹ 1 lakh. There is a
need to dismantle the machinery before delivering it to the buyer. Dismantling cost
is ₹ 1.50 lakhs. Specialised packaging cost would be ₹ 25 thousand and legal fees
would be ₹ 75 thousand.
The Inventory has been valued in accordance with Ind AS 2. The recoverable
value of CGU is ₹ 10 Lakh as on 31st March, 2018. In the next year, the company
has done the assessment of recoverability of the CGU and found that the value of
such CGU is ₹ 11 Lakhs ie on 31st March, 2019. The Recoverable value of Machine A
is ₹ 4,50,000 and combined Machine A and B is ₹ 7,60,000 as on 31st March, 2019.

Required:
a) Compute the impairment loss on CGU and carrying value of each asset after
charging impairment loss for the year ending 31st March, 2018 by providing
all the relevant working notes to arrive at such calculation.
b) Compute the prospective depreciation for the year 2018-2019 on the above
assets.
c) Compute the carrying value of CGU as at 31st March, 2019.

QUESTION 4

(RTP VIDEO NOV. 2019)

(TIMING IN VIDEO: 00:26:47)
(Question number in Rtp: 17)

East Ltd. (East) owns a machine used in the manufacture of steering wheels, which
are sold directly to major car manufacturers.
• The machine was purchased on 1st April, 20X1 at a cost of ₹ 500 000 through
a vendor financing arrangement on which interest is being charged at the rate
of 10 per cent per annum.
• During the year ended 31st March, 20X3, East sold 10 000 steering wheels at
a selling price of ₹ 190 per wheel.
• The most recent financial budget approved by East’s management, covering
the period 1st April, 20X3 – 31st March, 20X8, including that the company
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expects to sell each steering wheel for ₹ 200 during 20X3-X4, the price rising
in later years in line with a forecast inflation of 3 per cent per annum.
• During the year ended 31st March, 20X4, East expects to sell 10 000 steering
wheels. The number is forecast to increase by 5 per cent each year until 31st
March, 20X8.
• East estimates that each steering wheel costs ₹ 160 to manufacture, which
includes ₹ 110 variable costs, ₹ 30 share of fixed overheads and ₹ 20 transport
costs.
• Costs are expected to rise by 1 per cent during 20X4-X5, and then by 2 per
cent per annum until 31st March, 20X8.
• During 20X5-X6, the machine will be subject to regular maintenance costing ₹
50,000.
• In 20X3-X4, East expects to invest in new technology costing ₹ 100 000. This
technology will reduce the variable costs of manufacturing each steering wheel
from ₹ 110 to ₹ 100 and the share of fixed overheads from ₹ 30 to ₹ 15 (subject
to the availability of technology, which is still under development).
• East is depreciating the machine using the straight line method over the
machine’s 10 year estimated useful life. The current estimate (based on similar
assets that have reached the end of their useful lives) of the disposal
proceeds from selling the machine is ₹ 80 000 net of disposal costs. East
expects to dispose of the machine at the end of March, 20X8.
• East has determined a pre-tax discount rate of 8 per cent, which reflects the
market’s assessment of the time value of money and the risks associated with
this asset.
Assume a tax rate of 30%. What is the value in use of the machine in
accordance with Ind AS 36?

QUESTION 5

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 01:11:58)
(Question number in rtp: 9)

PQR Ltd. is the company which has performed well in the past but one of its major
assets, an item of equipment, suffered a significant and unexpected deterioration
in performance. Management expects to use the machine for a further four years
after 31 st March 20X6, but at a reduced level. The equipment will be scrapped
after four years. The financial accountant for PQR Ltd. has produced a set of cash-
flow projections for the equipment for the next four years, ranging from optimistic
caparveenjindal.com/lms 59

to pessimistic. CFO thought that the projections were too conservative, and he
intended to use the highest figures each year. These were as follows:
₹ ʼ000
Year ended 31st March 20X7 276
Year ended 31st March 20X8 192
Year ended 31st March 20X9 120
Year ended 31st March 20Y0 114

The above cash inflows should be assumed to occur on the last day of each financial
year. The pre-tax discount rate is 9%. The machine could have been sold at 31st
March 20X6 for ₹ 6,00,000 and related selling expenses in this regard could have
been ₹ 96,000. The machine had been re valued previously, and at 31st March 20X6
an amount of ₹ 36,000 was held in revaluation surplus in respect of the asset. The
carrying value of the asset at 31st March 20X6 was ₹ 660,000. The Indian
government has indicated that it may compensate the company for any loss in value
of the assets up to its recoverable amount.
Calculate impairment loss, if any and revised depreciation of asset. Also
suggest how Impairment loss, if any would be set off and how compensation
from government be accounted for?

QUESTION 6 (MIXED WITH IND AS 38)

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 01:33:43)
(Question number in rtp: 11)

One of the senior engineers at XYZ has been working on a process to improve
manufacturing efficiency and, consequently, reduce manufacturing costs. This is a
major project and has the full support of XYZʼs board of directors. The senior
engineer believes that the cost reductions will exceed the project costs within
twenty four months of their implementation. Regulatory testing and health and
safety approval was obtained on 1 June 20X5. This removed uncertainties
concerning the project, which was finally completed on 20 April 20X6. Costs of ₹
18,00,000, incurred during the year till 31st March 20X6, have been recognized as
an intangible asset. An offer of ₹ 7,80,000 for the new developed technology has
been received by potential buyer but it has been rejected by XYZ. Utkarsh believes
that the project will be a major success and has the potential to save the company
₹ 12,00,000 in perpetuity. Director of research at XYZ, Neha, who is a qualified
electronic engineer, is seriously concerned about the long term prospects of the
new process and she is of the opinion that competitors would have developed new
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technology at some time which would require to replace the new process within four
years. She estimates that the present value of future cost savings will be ₹
9,60,000 over this period. After that, she thinks that there is no certainty about
its future. What would be the appropriate accounting treatment of aforesaid issue?

QUESTION 7 (MIXED WITH FOREIGN CURRENCY)

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 01:53:25)
(Question number in Rtp: 10)

The UK entity with a sterling functional currency has a property located in US,
which was acquired at a cost of US$ 1.8 million when the exchange rate was ₤1 =
US$ 1.60. The property is carried at cost. At the balance sheet date, the
recoverable amount of the property (as a result of an impairment review) amounted
to US$ 1.62 million, when the exchange rate ₤1 = US$ 1.80. Compute the amount
which is to be reported in Profit & Loss of UK entity as a result of impairment, if
any. Ignore depreciation. Also analyse the total impairment loss on account of
change in value due to impairment component and exchange component.

QUESTION 8

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 00:02:25)
(Question number in Rtp: 20)

On 31 March 20X1, Vision Ltd acquired 80% of the equity shares of Mission Ltd for
₹ 190 million. The fair values of the net assets of Mission Ltd that were included in
the consolidated statement of financial position of Vision Ltd at 31 March 20X1
were ₹ 200 million. It is the Group’s policy to value the non-controlling interest in
subsidiaries at the date of acquisition at its proportionate share of the fair value
of the subsidiaries’ identifiable net assets.
On 31 March 20X4, Vision Ltd carried out its annual review of the goodwill on
consolidation of Mission Ltd and found evidence of impairment. No impairment had
been evident when the reviews were carried out at 31 March 20X2 and 31 March
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20X3. The review involved allocating the assets of Mission Ltd into three cash-
generating units and computing the value in use of each unit. The carrying values of
the individual units before any impairment adjustments are given below:

Unit A Unit B Unit C

₹ in million ₹ in million ₹ in million

Intangible assets 30 10 -
Property, Plant and Equipment 80 50 60
Current Assets 60 30 40

Total 170 90 100

Value in use of unit 180 66 104

It was not possible to meaningfully allocate the goodwill on consolidation to the

individual cash generating units but all the other net assets of Mission Ltd are
allocated in the table shown above.
The intangible assets of Mission Ltd have no ascertainable market value but all the
current assets have a market value that is at least equal to their carrying value.
The value in use of Mission Ltd as a single cash-generating unit on 31 March 20X4
is ₹ 350 million.
Discuss and compute the accounting treatment of impairment of goodwill as per Ind
AS 36?
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TOPIC 10
FIRST TIME ADOPTION OF IND AS (IND AS
101)

QUESTION 1

(MTP 5 VIDEO OCTOBER 2020)

(TIMING IN VIDEO: 00:20:20) (20 marks)
(Question number in mtp: 4)

Shaurya Limited is the Company having its registered and corporate office at New
Delhi. 60% of the Shaurya Limited’s shares are held by the Government of India and rest
by other investors.
This is the first time that Shaurya limited would be applying Ind AS for the preparation
of its financials for the current financial year 2019-2020. Following balance sheet is
prepared as per earlier GAAP as at the beginning of the preceding period along with the
additional information:
Balance Sheet as at 31 March 2018
(All figures are in ‘000, unless otherwise specified)

Particulars Amount

EQUITY AND LIABILTIES

(1) Shareholders’ Funds
(a) Share Capital 10,00,000
(b) Reserves & Surplus 25,00,000
(2) Nion-Current Liabilities
(a) Long Team Borrowings 4,50,000
(b) Long Term Provisions 3,50,000
(c) Deferred tax Liabilities 3,50,000
(3) Current Liabilities
(a) Trade payables 22,00,000
(b) Other current Liabilities 4,50,000
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(c) Short Term Provisions 12,00,000

TOTAL 85,00,000
AASETS
(1) Non-Current Assets
(a) Property, Plant & Equipment (net) 20,00,000
(b) Intangible assts 2,00,000
(c) Goodwill 1,00,000
(d) Non-current Investment 5,00,000
(e) Long Term Loans and Advances 1,50,000
(f) Other Non-Current Assets 2,00,000
(2) Current Assets
(a) Current Investments 18,00,000
(b) Inventories 12,50,000
(c) Trade Receivables 9,00,000
(d) Cash and Bank Balances 10,00,000
(e) Other Current Assets 4,00,000

TOTAL 85,00,000

Additional Information (All figures are in ;000’

1. Other current liabilities include ` 3,90,000 liabilities to be paid in cash such as
expense payable, Salary payable etc. and ` 60,000 are statutory government dues.
2. Long term loans and advances include ` 40,000 loan and the remaining amount
consists Advance to staff of ` 1,10,000
3. Other non-current assets of ` 2,00,000 consists Capital advances to suppliers.
4. Other current assets include ` 3,50,000 current assets receivable in cash and
Prepaid expenses of ` 50,000
5. Short term provisions include Dividend payable of ` 2,00,000. The dividend
payable had been as a result of board meeting when the declaration of dividend
for financial year 2017-2018 was made. However, it is subject to approval of
shareholders in the annual general meeting.

Chief financial officer of Shaurya Limited has also presented the following
information against corresponding relevant items in the balance sheet:
a) Property, Plant & Equipment consists a class of assets as office buildings whose
carrying amount is ` 10,00,000. However, the fair value of said office building
as on the date of transition is estimated to be ` 15,00,000. Company wants to
follow revaluation model as its accounting policy in respect of its property, Plant
and equipment for the first annual Ind AS financial statements.
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b) The fair value of Intangible assets as on the date of transition is estimated to

be ` 2,50,000. However, the management is reluctant to incorporate the fair
value changes in books of account.
c) Shaurya Ltd. had acquired 80% shares in a company, Excel private limited few
years ago thereby acquiring the control upon it at that time. Shaurya Ltd.
recognised goodwill as per erstwhile accounting standards by accounting the
excess of consideration paid over the net assts acquired at the date of
acquisition. Fair value exercise was not done at the time of acquisition.
d) Trade receivables include an amount of ` 20,000 as provision for doubtful debts
measured in accordance with previous GAAP. Now as per latest estimates, the
provision needs to be revised to ` 25,000.
e) Company had given a loan of ` 1,00,000 to an entity for the term of 10 years six
years ago. Transaction costs were incurred separately for this loan. The loan
carries an interest rate of 7%. The principal amount is to be repaid in equal
installments over the period of ten years at the year end. Interest is also
payable at each year end. The fair value of loan as on the date of transition. is
` 50,000 as against the carrying amount of loan which at present amounts to `
40,000. However, Ind As 109 mandates to charge the interest expense as per
effective interest method after the adjustment of transaction costs.
Management says it is tedious task in the given case to apply the effective
interest rate changes with retrospective effects and hence is reluctant to
apply the same retrospectively in its first time adoption.
f) In the long term borrowings, ` 4,50,000 of component is due towards the State
Government. Interest is payable on the government loan at 4% however the
prevailing rate in the market at present is 8% the fair market value of loan
stands at ` 4,20,000 as on the relevant date.
g) Under Previous GAAP, the mutual funds were measured at cost or market value
whichever is lower. Under Ind AS the Company has designated these investment
at fair value through profit or loss. The fair value of mutual funds as per previous
GAAP is ` 2,00,000 as included in current investment. However, the fair value
of mutual funds as on the date of transition is ` 2,30,000.
h) Ignore separate calculation of deferred tax on above adjustment. Assume the
net deferred tax income to be Rs. 50,000. on account of Ind As Transition
adjustments.
Requirements:
- Prepare transiton date balance sheet of Shaurya Limited as per Indian
Accounting Standards
- Show necessary explanation for each of the items presented by chief
financial offer in the form of notes, which may or may not require the
adjustment as on the date of transition.
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QUESTION 2

(MTP 9 VIDEO MARCH 2022)

(TIMING IN VIDEO: 00:30:47) (12 marks)
(Question number in mtp: 2C)

(i) There is a significant decommissioning obligation in connection with several oil

wells, but its previous GAAP did not require the obligation to be recognized.
Discuss the treatment of decommissioning obligation as per relevant Ind as.
(ii) G Ltd. has four assets, each in a different class under property, plant &
equipment. Assets 1 and 2 are revalued under previous GAAP (AS). Assets 3
and 4 are not. Under previous GAAP, at 31st March 20X1, immediately prior to
the entity’s date of transition to Ind AS, it Balance Sheet (extract) is a
follows:

Asset 1 Asset 2 Asset 3 Asset 4 Total

Valuation Valuation Cost Cost
` ` ` ` `
Cost or revaluation 5,000 2,000 4,000 4,500 15,500
Accumulated (1,000) (500) (2,000) (1,700) (5,200)
deprecation
Net book value 4,000 1,500 2,000 2,800 10,300
Revaluation surplus 2,500 500 - - 3,000
On adoption of Ind, its management decides that, under Ind AS, it will:
- Continue to revalue asset 1. The fair value of asset 1 at the date of transition is
not materially different from its carrying value under previous GAAP;
- Use the previous valuation of asset 2 as deemed cost, and adopt a policy of cost
less depreciation under Ind AS.
- Adopt a policy of revaluation for asset 3. The fair value of asset 3 at the entity’s
date of transition is ` 5,000;
- Continue to use a policy of cost less depreciation for asset 4
All depreciation methods are already in accordance with those required by Ind AS
16.
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Discuss the treatment under Ind AS of valuation of assets 1,2,3, & 4 being part of
property, plant & equipment?

QUESTION 3 (MIXED WITH IND AS 111)

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 02:41:53)
(Question number in rtp: 11)

XYZ Pvt. Ltd. is a company registered under the Companies Act, 2013 following
Accounting Standards notified under Companies (Accounting Standards) Rules,
2006. The Company has decided to voluntary adopt Ind AS w.e.f 1st April, 2018
with a transition date of 1st April, 2017.
The Company has one Wholly Owned Subsidiary and one Joint Venture which are
into manufacturing of automobile spare parts.
The -consolidated financial statements of the Company under Indian GAAP are as
under:
Consolidated Financial Statements
(₹ in Lakhs)
Particulars 31.03.2018 31.03.2017
Shareholder's Funds
Share Capital 7,953 7,953
Reserves & Surplus 16,547 16,597
Non-Current Liabilities
Long Term Borrowings 1,000 1,000
Long Term Provisions 1,101 691
Other Long-Term Liabilities 5,202 5,904
Current Liabilities
Trade Payables 9,905 8,455
Short Term Provisions 500 475
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Total

Non-Current Assets
Property Plant & Equipment 21,488 22,288
Goodwill on Consolidation of subsidiary and 1,507 1,507
JV
Investment Property 5,245 5,245
Long Term Loans & Advances 6,350 6,350
Current Assets
Trade Receivables 4,801 4,818
Investments 1,263 3,763
Other Current Assets 1,554 104

Total 42,208 41,075

Additional Information:
The Company has entered into a joint arrangement by acquiring 50% of the equity
shares of ABC Pvt. Ltd. Presently, the same has been accounted as per the
proportionate consolidated method. The proportionate share of assets and
liabilities of ABC Pvt. Ltd. included in the consolidated financial statement of XYZ
Pvt. Ltd. is as under:

Particulars ₹ in Lakhs

Property, Plant & Equipment 1,200

Long Term Loans & Advances 405
Trade Receivables 280
Other Current Assets 50
Trade Payables 75
Short Term Provisions 35

The Investment is in the nature of Joint Venture as per Ind AS 111.

The Company has approached you to advice and suggest the accounting adjustments
which are required to be made in the opening Balance Sheet as on 1st April, 2017.

QUESTION 4

(RTP VIDEO NOV. 2019)

(TIMING IN VIDEO: 01:17:36)
(Question number in Rtp: 14)
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Mathur India Private Limited has to present its first financials under Ind AS for
the year ended 31st March, 20X3. The transition date is 1st April, 20X1.
The following adjustments were made upon transition to Ind AS:
(a) The Company opted to fair value its land as on the date on transition.
The fair value of the land as on 1st April, 20X1 was ₹ 10 crores. The carrying
amount as on 1st April, 20X1 under the existing GAAP was ₹ 4.5 crores.
(b) The Company has recognised a provision for proposed dividend of ₹ 60 lacs and
related dividend distribution tax of ₹ 18 lacs during the year ended 31st
March, 20X1. It was written back as on opening balance sheet date.
(c) The Company fair values its investments in equity shares on the date of
transition. The increase on account of fair valuation of shares is ₹ 75 lacs.
(d) The Company has an Equity Share Capital of ₹ 80 crores and Redeemable
Preference Share Capital of ₹ 25 crores.
(e) The reserves and surplus as on 1st April, 20X1 before transition to Ind AS
was ₹ 95 crores representing ₹ 40 crores of general reserve and ₹ 5 crores of
capital reserve acquired out of business combination and balance is surplus in
the Retained Earnings.
(f) The company identified that the preference shares were in nature of financial
liabilities.
What is the balance of total equity (Equity and other equity) as on 1st April, 20X1
after transition to Ind AS? Show reconciliation between total equity as per AS
(Accounting Standards) and as per Ind AS to be presented in the opening balance
sheet as on 1st April, 20X1.
Ignore deferred tax impact.

QUESTION 5

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 02:58:46)
(Question number in Rtp: 1)

HIM Limited having net worth of ₹ 250 crores is required to adopt Ind AS from 1
April, 20X2 in accordance with the Companies (Indian Accounting Standard) Rules
2015.
Rahul, the senior manager, of HIM Ltd. has identified following issues which need
specific attention of CFO so that opening Ind AS balance sheet as on the date of
transition can be prepared:
Issue 1 : As part of Property, Plant and Equipment, Company has elected to measure
land at its fair value and want to use this fair value as deemed cost on the date of
transition. The carrying value of land as on the date of transition was ₹ 5,00,000.
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The land was acquired for a consideration of ₹ 5,00,000. However, the fair value of
land as on the date of transition was ₹ 8,00,000.
Issue 2 : Under Ind AS, the Company has designated mutual funds as investments
at fair value through profit or loss. The value of mutual funds as per previous GAAP
was ₹ 4,00,000 (at cost). However, the fair value of mutual funds as on the date of
transition was ₹ 5,00,000.
Issue 3 : Company had taken a loan from another entity. The loan carries an
interest rate of 7% and it had incurred certain transaction costs while obtaining
the same. It was carried at cost on its initial recognition. The principal amount is to
be repaid in equal instalments over the period of loan. Interest is also payable at
each year end. The fair value of loan as on the date of transition is ₹ 1,80,000 as
against the carrying amount of loan which at present equals ₹ 2,00,000.
Issue 4 : The company has declared dividend of ₹ 30,000 for last financial year.
On the date of transition, the declared dividend has already been deducted by the
accountant from the company’s ‘Reserves & Surplus’ and the dividend payable has
been grouped under ‘Provisions’. The dividend was only declared by board of
directors at that time and it was not approved in the annual general meeting of
shareholders. However, subsequently when the meeting was held it was ratified by
the shareholders.
Issue 5 : The company had acquired intangible assets as trademarks amounting to
₹ 2,50,000. The company assumes to have indefinite life of these assets. The fair
value of the intangible assets as on the date of transition was ₹ 3,00,000. However,
the company wants to carry the intangible assets at ₹ 2,50,000 only.
Issue 6 : After consideration of possible effects as per Ind AS, the deferred tax
impact is computed as ₹ 25,000. This amount will further increase the portion of
deferred tax liability. There is no requirement to carry out the separate calculation
of deferred tax on account of Ind AS adjustments.
Management wants to know the impact of Ind AS in the financial statements of
company for its general understanding.
Prepare Ind AS Impact Analysis Report (Extract) for HIM Limited for
presentation to the management wherein you are required to discuss the
corresponding differences between Earlier IGAAP (AS) and Ind AS against
each identified issue for preparation of transition date balance sheet. Also
pass journal entry for each issue.

QUESTION 6

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 03:46:50)
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(Question number in Rtp: 15)

GG Ltd., a listed company, prepares its first Ind AS financial statements for the
year ending 31st March, 20X3. The date of transition is 1st April, 20X1. The
functional and presentation currency is Rupee. The financial statements as at and
for the year ended 31st March, 20X3 contain an explicit and unreserved statement
of compliance with Ind AS. Previously it was using Indian GAAP (AS) as base.
It has already published its first interim results of quarter 1, quarter 2 and quarter
3 of 20X2- 20X3 in accordance with Ind AS 34 and Ind AS 101. The interim
financial report included the reconciliations both of total comprehensive income and
of equity that are required by Ind AS 101.
Since issuing the interim financial report, its management has concluded that one
of accounting policy choices applied at the interim should be changed for the full
year.
How should GG Ltd. deal with the change in accounting policy under Ind AS
framework?

QUESTION 7 (MIXED WITH IND AS 102 & IND AS 8)

(RTP VIDEO NOV. 2022)

(TIMING IN VIDEO: 02:46:13)
(Question number in Rtp: 1)

On 1st April 20X1, Nuogen Ltd. had granted 1,20,000 share options to its employees
with the vesting condition being a service condition as follows:
• Vesting date : 31st March 20X2 - 80,000 share options (1-year vesting period
since grant date)
• Vesting date : 31st March 20X5 - 40,000 share options (4-year vesting period
since grant date)
Each option can be converted into one equity share of Nuogen Ltd. The fair value
of the options on grant date, i.e., on 1st April 20X1 was ₹ 20.
Nuogen Ltd. is required to prepare financial statements in Ind AS for the financial
year ending 31st March 20X4. The transition date for Ind AS being 1st April 20X2.
The entity has disclosed publicly the fair value of both these equity instruments as
determined at the measurement date, as defined in Ind AS 102.
The previous applicable GAAP for the entity was IGAAP (AS) and therein, the entity
had not adopted intrinsic method of valuation.
The share options have not been yet exercised by the employees of Nuogen Ltd.
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How the share based payment should be reflected in, the books of Nuogen
Ltd. as on 31st March 20X4, assuming that the entity has erred by not
passing any entry for the aforementioned transactions in the books of
Nuogen Ltd. on grant date, i.e. 1st April 20X1?

TOPIC 11
PRESENTATION OF FINANCIAL STATEMENTS
(IND AS 1)

QUESTION 1

(MTP 5 VIDEO OCTOBER 2020)

(TIMING IN VIDEO: 01:10:00) (14 marks)
(Question number in mtp: 5B)

Following are the Financial Statements of Abraham Ltd.:

Balance Sheet
Particulars Note As at 31 March,
No. 2020
(` in lakh)
EQUITY AND LIABILITIES:
Shareholders’ funds
Share capital (shares of ` 10 each) 1,000
Reserves and surplus 1 2,400
Non-current liabilities
Long term borrowings 2 5,700
Deferred tax liabilities 3 400
Current liabilities
Trade payables 300
Short-term provisions 300
Other current liabilities 4 200
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Total 10,300
ASSETS
Non-current assets
Property, plant and equipment 5,000
Deferred tax assets 3 700
Current assets
Inventories 1,500
Trade receivables 5 1,100
Cash and bank balances 2,000
Total 10,300

Statement of Profit & Loss

Particulars Note Year ended 31 March 2020

No. (` in lakh)

Revenue from operations 6,000

Expenses:
Employee benefit expense 1,200
Operating costs 3,199
Depreciation 450
Total expenses 4,849
Profit before tax 1,151
Tax expense 201
Profit after tax 950

Notes to Accounts:
Note 1: Reserves and surplus (` in lakh)

Capital reserve 500

Surplus from P & L
Opening balance 550
Additions 950 1,500
Reserve for foreseeable loss 400
Total 2,400
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Note 2: Long-term borrowings

Term loan from bank 5,700

Total 5,700
Note 3: Deferred tax

Deferred tax asset 700

Deferred tax liability 400
Total 300
Note 4: Other current liabilities

Unclaimed dividends 10
Billing in advance 150
Other current liabilities 40
Total 200

Note 5: Trade Receivables

Considered good (outstanding within 6 months) 1,065

Considered doubtful (due from past 1 year) 40
Provision for doubtful debts (5)
Total 1,100

Additional information:
(i) Share capital comprises of 100 lakh shares of ` 10 each.
(ii) Term Loan from bank for ` 5,700 lakh also includes interest accrued and due
of ` 700 lakh as on the reporting date.
(iii) Reserve for foreseeable loss is created against a service contract due within 6
months.
(iv) Inventory should be valued at cost ` 1,500 lakh, NRV as on date is ` 1,200 lakh.
(v) A dividend of 10% was declared by the Board of directors of the company.
(vi) Accrued Interest income of ` 300 lakh is not booked in the books of the
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company.
(vii) Deferred taxes related to taxes on income are levied by the same governing tax
laws.
Identify and report the errors and misstatements in the above extracts and
prepare corrected Balance Sheet and Statement of Profit & Loss and where required
the relevant notes to the accounts with explanations thereof.

QUESTION 2

(MTP 7 VIDEO OCTOBER 2021)

(TIMING IN VIDEO: 00:04:58) (4marks)
(Question number in mtp: 1B)

A holding company [being the entity under consideration] gives a loan /

intercorporate deposit to a subsidiary that is recoverable on demand, at a rate
of interest at 10%.

Should such loan be disclosed as a current/non-current asset in the books of

the holding company?

How relevant would the commercial reality of the transaction be in comparison

to the legal terms of the transaction?

How this loan / inter-corporate deposit that is repayable on demand would be

classified in the books of the subsidiary?

QUESTION 3

(MTP 9 VIDEO MARCH 2022)

(TIMING IN VIDEO: 00:23:09) (4marks)
(Question number in mtp: 2A)

(i) B Ltd. produces aircrafts. The length of time between first purchasing
raw materials to make the aircrafts and the date the company completes the
production and delivery is 9 months. The company receives payment for the
aircrafts 7 months after the delivery.
(a) What is the length of operating cycle?
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(b) How should it treat its inventory and debtors?

(ii) On 1st April, 20X3, Charming Ltd issued 1,00,000 ` 10 bonds for ` 10,00,000.
On 1st April, each year, interest at the fixed rate of 8% per year is payable on
outstanding capital amount of the bonds (i.e. the first payment will be made on
1st April, 20X4). On 1st April each year (i.e. from 1st April, 20X4), Charming
Ltd has a contractual obligation to redeem 10,000 of the bonds at ` 10 per bond.
In its statement of financial position at 31 st March, 20X4. How should this be
presented in the financial statements?

QUESTION 4

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 00:00:18)
(Question number in Rtp: 1)

Deepak started a new company Softbharti Pvt. Ltd. with Iktara Ltd. wherein
investment of 55% is done by Iktara Ltd. and rest by Deepak. Voting powers are to
be given as per the proportionate share of capital contribution. The new company
formed was the subsidiary of Iktara Ltd. with two directors, and Deepak eventually
becomes one of the directors of company. A consultant was hired and he charged ₹
30,000 for the incorporation of company and to do other necessary statuary
registrations. ₹ 30,000 is to be charged as an expense in the books after
incorporation of company. The company, Softbharti Pvt. Ltd. was incorporated on
1st April 2019.
The financials of Iktara Ltd. are prepared as per Ind AS.
An accountant who was hired at the time of company’s incorporation, has prepared
the draft financials of Softbharti Pvt. Ltd. for the year ending 31st March, 2020
as follows:
Statement of Profit and Loss
Particulars Amount (₹)

Revenue from operations 10,00,000

Other Income 1,00,000

Total Revenue (a) 11,00,000

Expenses:
Purchase of stock in trade 5,00,000
(Increase)/Decrease in stock in trade (50,000)
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Employee benefits expense 1,75,000

Depreciation 30,000
Other expenses 90,000
Total Expenses (b) 7,45,000
Profit before tax (c) = (a)-(b) 3,55,000
Current tax 1,06,500
Deferred tax 6,000
Total tax expense (d) 1,12,500

Profit for the year (e) = (c) – (d) 2,42,500

Balance Sheet
Particulars Amount (₹)

EQUITY AND LIABILITIES

(1) Shareholders’ Funds
(a) Share Capital 1,00,000
(b) Reserves & Surplus 2,27,500
(2) Non-Current Liabilities
(a) Long Term Provisions 25,000
(b) Deferred tax liabilities 6,000
(3) Current Liabilities
(a) Trade Payables 11,000
(b) Other Current Liabilities 45,000
(c) Short Term Provisions 1,06,500
TOTAL 5,21,000

ASSETS
(1) Non Current Assets
(a) Property, plant and equipment (net) 1,00,000
(b) Long-term Loans and Advances 40,000
(c) Other Non Current Assets 50,000
(2) Current Assets
(a) Current Investment 30,000
(b) Inventories 80,000
(c) Trade Receivables 55,000
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(d) Cash and Bank Balances 1,15,000

(e) Other Current Assets 51,000
TOTAL 5,21,000
Additional information of Softbharti Pvt Ltd.:
i. Deferred tax liability of ₹ 6,000 is created due to following temporary
difference:
Difference in depreciation amount as per Income tax and Accounting profit
ii. There is only one property, plant and equipment in the company, whose closing
balance as at 31st March, 2020 is as follows:
Asset description As per Books As per Income tax

Property, plant and ₹ 1,00,000 ₹ 80,000

equipment
iii. Pre incorporation expenses are deductible on straight line basis over the
period of five years as per Income tax. However, the same are immediately
expensed off in the books.
iv. Current tax is calculated at 30% on PBT - ₹ 3,55,000 without doing any
adjustments related to Income tax. The correct current tax after doing
necessary adjustments of allowances / disallowances related to Income tax
comes to ₹ 1,25,700.
v. After the reporting period, the directors have recommended dividend of ₹
15,000 for the year ending 31st March, 2020 which has been deducted from
reserves and surplus. Dividend payable of ₹ 15,000 has been grouped under
‘other current liabilities’ alongwith other financial liabilities.
vi. There are ‘Government statuary dues’ amounting to ₹ 15,000 which are grouped
under ‘other current liabilities’.
vii. The capital advances amounting to ₹ 50,000 are grouped under ‘Other non-
current assets’.
viii. Other current assets of ₹ 51,000 comprise Interest receivable from trade
receivables.
ix. Current investment of ₹ 30,000 is in shares of a company which was done with
the purpose of trading; current investment has been carried at cost in the
financial statements. The fair value of current investment in this case is ₹
50,000 as at 31st March, 2020.
x. Actuarial gain on employee benefit measurements of ₹ 1,000 has been omitted
in the financials of Softbharti private limited for the year ending 31 st March,
2020.
The financial statements for financial year 2019-2020 have not been yet approved.
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You are required to ascertain that whether the financial statements of Softbharti
Pvt. Ltd. are correctly presented as per the applicable financial reporting
framework. If not, prepare the revised financial statements of Softbharti Pvt. Ltd.
after the careful analysis of mentioned facts and information.

QUESTION 5

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 00:56:21)
(Question number in Rtp: 16)

An entity has the following trial balance line items. How should these items be
classified, i.e., current or non-current as per Ind AS 1?
(a) Receivables (viz., receivable under a contract of sale of goods in which an
entity deals)
(b) Advance to suppliers
(c) Income tax receivables [other than deferred tax]
(d) Insurance spares

QUESTION 6

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 03:59:50)
(Question number in Rtp: 2)

Is offsetting permitted under the following circumstances?

(a) Expenses incurred by a holding company on behalf of subsidiary, which is
reimbursed by the subsidiary - whether in the separate books of the holding
company, the expenditure and related reimbursement of expenses can be
offset?
(b) Whether profit on sale of an asset against loss on sale of another asset can
be offset?
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(c). When services are rendered in a transaction with an entity and services
are received from the same entity in two different arrangements, can the
receivable and payable be offset?

QUESTION 7

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 00:35:38)
(Question number in Rtp: 2)

An entity manufactures passenger vehicles. The time between purchasing of

underlying raw materials to manufacture the passenger vehicles and the date the
entity completes the production and delivers to its customers is 11 months.
Customers settle the dues after a period of 8 months from the date of sale.
(a) Will the inventory and the trade receivables be current in nature?
(b) Assuming that the production time was say 15 months and the time lag between
the date of sale and collection from customers is 13 months, will the answer
be different?

QUESTION 8 (APPLICABILITY OF IND AS)

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 00:43:29)
(Question number in Rtp: 3)

Fresh Vegetables Limited (FVL) was incorporated on 2nd April, 20X1 under the
provisions of the Companies Act, 2013 to carry on the wholesale trading business in
vegetables. As per the audited accounts of the financial year ended 31 st March,
20X7 approved in its annual general meeting held on 31st August, 20X7 its net
worth, for the first time since incorporation, exceeded ₹ 250 crore. The financial
statements since inception till financial year ended 31st March, 20X6 were
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prepared in accordance with the Companies (Accounting Standards) Rules 2006. It

has been advised that henceforth it should prepare its financial statements in
accordance with the Companies (Indian Accounting Standards) Rules, 2015.
The following additional information is provided by the Company:
— FVL has in the financial year 20X2-20X3 entered into a 60:40 partnership
with Logistics Limited and incorporated a partnership firm 'Vegetable
Logistics Associates' (VLA) to carry on the logistics business of vegetables
from farm to market.
— FVL also has an associate company Social Welfare Limited (SWL) that was
incorporated in July, 20X5 as a charitable organization and registered under
section 8 of the Companies Act, 2013. Social Welfare Limited has been the
associate company of FVL since its incorporation.
Examine the applicability of Ind AS on VLA & SWL.

QUESTION 9

(RTP VIDEO NOV 2022)

(TIMING IN VIDEO: 01:38:31)
(Question number in Rtp: 4)

As per the statutory requirements, exceptional items are required to be disclosed

whereas Ind AS 1 requires separate disclosures of material items and how these
are to be presented in the financial statements. Does that imply that ‘exceptional’
means ‘material’? Give examples. How should these be presented in the financial
statements?
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TOPIC 12
EVENTS AFTER BALANCE SHEET DATE
(IND AS 10)

QUESTION 1

(MTP 6 VIDEO MARCH 2021)

(TIMING IN VIDEO: 00:07:30) (6marks)
(Question number in mtp: 3A)

Discuss with reasons whether these events are in nature of adjusting or non-adjusting
and the treatment needed in light of accounting standard Ind AS 10.
(i) Moon Ltd. won an arbitration award on 25Th April, 20X1 for Rs. 1 crore. From the
arbitration proceeding, It was evident the Company is most likely to win the
arbitration award. The directors approved the financial statements for the year
ending 31.03.20X1 on 1st May, 20X1. The management did not consider the effect
of the above transaction in Financial Year 20X0-20X1, as it was favorable to the
Company and the award come after the end of the financial year.
(ii) Zoom Ltd. has a trading business of Mobile telephones. The Company has purchased
1000 mobiles phones at Rs. 5,000 each on 15th March, 20X1. The manufactures of
phone had announced the release of the new version on 1st March, 20X1 but not
announced the price. Zoom Ltd. has valued inventory at cost of Rs. 5,000 each at
the year ending 31st March, 20X1
Due to arrival of new advance version of Mobile Phone on 8Th April, 20X1 the selling
prices of the mobile stocks remaining with Company was dropped at Ra 4,000 each.
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The Financial statements of the Company valued mobile phone @ Rs. 5,000 each and
not at the value @ Rs. 4,000 less expenses on sales, as the price reduction in selling
price was effected after 31.03.20X1.
(iii) There as an old due from a debtor amounting to Rs. 15 lakh against whom insolvency
proceedings was instituted prior to the financial year ending 31st March, 20X1. The
debtor was declared insolvent on 15th April, 20X1.
(iv) Assume that subsequent to the year and before the financial statements are
approved. Company’s management announces that it will restructure the operation
of the company Management plants to make significant redundancies and to close a
few divisions of company’s business; however, there is no formal plan yet. Should
management recognize a provision in the books. If the company decides subsequent
to end of the accounting year to restructure its operations?

QUESTION 2 (IND AS 10 MIXED WITH IND AS 102)

(MTP 7 VIDEO OCTOBER 2021)

(TIMING IN VIDEO: 00:16:26) (6marks)
(Question number in mtp: 2A)

Ryder, a public limited company is reviewing certain events which have occurred
since its year end 31st March, 20X4. The financial statements were authorized
for issue on 12th May, 20X4. The following events are relevant to the financial
statements for the Year ended 31st March, 20X4.

The company granted share appreciation rights (SARs) to its employees on 1st
April, 20X2 based on 10 million shares. At the date the rights are exercised, the
SAR’s provide employees with the right to receive cash equal to the appreciation
in the company’s share price since the grant date. The rights vested on 31 st
March, 20X4 and payment was made on schedule on 1st May, 20X4.
The FV of the SAR’s per share at 31st March, 20X3 was ` 6, at 31st March, 20X4
was ` 8 and at 1st May, 20X4 was ` 9. The company has recognized a liability for
the SAR’s as at 31st March, 20X2 based upon Ind AS 102 ‘Share-based Payments’
but the liability was stated at the same amount at 31st March, 20X4.

Discuss the accounting treatment of the above events in the financial statements
of the Ryder Group for the year ending 31st March, 20X4 taking into account the
implications of events occurring after the reporting period.

QUESTION 3
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(MTP 8 VIDEO NOVEMBER 2021)

(TIMING IN VIDEO: 00:41:28) (8marks)
(Question number in mtp: 5B)

Discuss with reasons whether these events are in nature of adjusting or non-adjusting
and the treatment needed in light of accounting standard Ind AS 10.
(i) Moon Ltd. won an arbitration award on 25Th April, 20X1 for ` 1 crore. From the
arbitration proceeding, It was evident that the Company is most likely to win the
arbitration award. The director approved the financial statements for the year
ending 31.03.20X1. On 1st May, 20X1. The management did not consider the effect
of the above transaction in Financial the financial Year 20X0-20X1, as it was
favorable to the Company and the award come after the end of the financial year.
(ii) Zoom Ltd. has a trading business of Mobile telephones. The Company has purchased
1000 mobiles phones at ` 5,000 each on 15th March, 20X1. The manufacturers of
phone had announced the release of the new version on 1st March, 20X1 but had not
announced the price. Zoom Ltd. has valued inventory at cost ` 5,000 each at the
year ending 31st March,20X1,
Due to arrival of new advance version of Mobile phone on 8th April, 20X1 the selling
price of the mobile stocks remaining with Company was dropped at ` 4,000 each,

The financial statements of the company valued mobile phones @ 5,000 each and
not at the value @ ` 4,000 less expenses on sales, as the price reduction in selling
price was effected after 31,03,20X1.
(iii) There as an old due from a debtor amounting to ` 15 lakh against whom insolvency
proceedings was instituted prior to the financial year ending 31st March, 20X1. The
debtor was declared insolvent on 15th April, 20X1.
(iv) Assume that subsequent to the year end and before the financial statements are
approved, Company’s management announces the it will restructure the operation
of the Company, Management plans to make significant redundancies and to close a
few divisions of Company’s business; however, there is no formal plan yet. Should
management recognize a provision in the books, if the company decides subsequent
to end of the accounting year to restructure its operations?

QUESTION 4

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 01:54:09)
(Question number in rtp: 7)
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XYZ Ltd. was formed to secure the tenders floated by a telecom company for
publication of telephone directories. It bagged the tender for publishing
directories for Pune circle for 5 years. It has made a profit in 2013-2014, 2014-
2015, 2015-2016 and 2016-2017. It bid in tenders for publication of directories
for other circles – Nagpur, Nashik, Mumbai, Hyderabad but as per the results
declared on 23rd April, 2017, the company failed to bag any of these. Its only
activity till date is publication of Pune directory. The contract for publication of
directories for Pune will expire on 31st December 2017. The financial statements
for the F.Y. 2016-17 have been approved by the Board of Directors on July 10, 2017.
Whether it is appropriate to prepare financial statements on going concern basis?

QUESTION 5

(RTP VIDEO NOV. 2019)

(TIMING IN VIDEO: 02:27:04)
(Question number in Rtp: 8)

ABC Ltd. received a demand notice on 15th June, 2017 for an additional amount of
₹ 28,00,000 from the Excise Department on account of higher excise duty levied
by the Excise Department compared to the rate at which the company was creating
provision and depositing the same. The financial statements for the year 2016-17
are approved on 10th August, 2017. In July, 2017, the company has appealed against
the demand of ₹ 28,00,000 and the company has expected that the demand would
be settled at ₹ 15,00,000 only. Show how the above event will have a bearing on the
financial statements for the year 2016-17. Whether these events are adjusting or
non-adjusting events and explain the treatment accordingly.

QUESTION 6

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 02:39:13)
(Question number in Rtp: 19)

XYZ Ltd. sells goods to its customer with a promise to give discount of 5% on list
price of the goods provided that the payments are received from customer within
15 days. XYZ Ltd. sold goods of ₹ 5 lakhs to ABC Ltd. between 17th March, 20X1
and 31st March, 20X1. ABC Ltd. paid the dues by 15th April, 20X1 with respect
to sales made between 17th March, 20X1 and 31st March, 20X1. Financial
statements were approved for issue by Board of Directors on 31st May, 20X1.
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State whether discount will be adjusted from the sales at the end of the
reporting period.

TOPIC 13
CONSOLIDATION WITH SUBSIDIARY
(IND AS 110)

QUESTION 1

(MTP 7 VIDEO OCTOBER 2021) (SAME QUESTION IN MTP 9 MARCH 22)

(TIMING IN VIDEO: 00:44:06) (15marks)
(Question number in mtp: 3B)

On 1st April 20X1, A Limited acquired 80% of the share capital of S Limited. On
acquisition date the share capital and reserves of S Ltd. stood at ` 5,00,000 and `
1,25,000 respectively.

A Limited paid initial cash consideration of ` 10,00,000. Additionally, A Limited

issued 2,00,000 equity shares with a nominal value of ` 1 per share at current
market value of ` 1.80 per share.

It was also agreed that A Limited would pay a further sum of ` 5,00,000 after
three years. A Limited's cost of capital is 10%. The appropriate discount factor
for ` 1 @ 10% receivable at the end of

1st year: 0.91

2nd year: 0.83
3rd year: 0.75
The shares and deferred consideration have not yet been recorded by A
limited.
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Below are the Balance Sheet of A Limited and S Limited as at 31st March, 20X3:
A Limited (` S Limited (`
000) 000)

Non-current assets:
Property, plant & equipment 5,500 1,500

Investment in S Limited at cost 1,000

Current assets:
550 100
Inventory
400 200
Receivables
200 50
Cash
7,650 1,850

Equity:
2,000 500
Share capital
1,400 300
Retained earnings
3,400 800

3,000 400
Non-current liabilities
1,250 650
Current liabilities
7,650 1,850

Further information:
(i) On the date of acquisition the fair values of S Limited's plant exceeded its
book value by ` 2,00,000. The plant had a remaining useful life of five years at
this date;

(ii) The consolidated goodwill has been impaired by ` 2,58,000; and

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(iii) The A Limited Group, values the non-controlling interest using the fair value
method. At the date of acquisition, the fair value of the 20% non-controlling
interest was ` 3,80,000.

You are required to prepare Consolidated Balance Sheet of A Limited as at 31st

March, 20X3. (Notes to Account on Consolidated Balance Sheet is not required).

QUESTION 2 (MIXED WITH IND AS 28)

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 02:01:31)
(Question number in rtp: 8)

Angel Ltd. has adopted Ind AS with a transition date of 1st April, 2017. Prior to
Ind AS adoption, it followed Accounting Standards notified under Companies
(Accounting Standards) Rules, 2006 (hereinafter referred to as "IGAAP").
It has made investments in equity shares of Pharma Ltd., a listed company engaged
in the business of pharmaceuticals. The shareholding pattern of Pharma Ltd. is given
below:

Shareholders (refer Note 1) Percentage shareholding as

on 1st April, 2017

Angel Ltd. 21%

Little Angel Ltd. (refer Note 2) 24%
Wealth Master Mutual Fund (refer Note 3) 3%
Individual public shareholders (refer Note 4) 52%
Notes:
(1) None of the shareholders have entered into any shareholders' agreement.
(2) Little Angel Ltd. is a subsidiary of Angel Ltd. (under Ind AS) in which Angel
Ltd. holds 51% voting power.
(3) Wealth Master Mutual Fund is not related party of either Little Angel Ltd. or
Pharma Ltd.
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(4) Individual public shareholders represent 17,455 individuals. None of the

individual shareholders hold more than 1% of voting power in Pharma Ltd.
All commercial decisions of Pharma Ltd. are taken by its directors who are
appointed by a simple majority vote of the shareholders in the annual general
meetings ("AGM ”). The following table shows the voting pattern of past AGMs of
Pharma Ltd.:

Shareholders AGM for the financial year:

2013-14 2014-15 2015-16

Angel Ltd. Attended and Attended and Attended and voted
voted voted in favour of all the
in favour of all the in favour of all the resolutions
resolutions resolutions
Little Angel Attended and Attended and Attended and voted
Ltd. voted as per voted as per as per directions of
directions of Angel directions of Angel Angel Ltd
Ltd. Ltd
Wealth Attended and Attended and Attended and voted
Master voted in favour of voted in favour of in favour of all the
Mutual Fund all the resolutions all the resolutions resolutions except
except for the except for the for the
reappointment of reappointment of reappointment of the
the retiring the retiring retiring directors
directors directors
Individuals 7% of the individual 8% of the 6% of the individual
shareholders individual shareholders
attended the AGM. shareholders attended the AGM.
All the individual attended the All the individual
shareholders voted AGM. All the shareholders
in favour of all the individual voted in favour of all
resolutions, except shareholders the resolutions,
that 50% of the voted in favour of except that 50% of
individual all the resolutions, the individual
Shareholders voted except that 50% Shareholders voted
against the of the individual against the resolution
resolution to Shareholders to appoint the
appoint the retiring voted against the retiring directors.
directors. resolution to
appoint the
retiring directors.
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Pharma Ltd. has obtained substantial long term borrowings from a bank. The loan is
payable in 20 years from 1st April, 2017. As per the terms of the borrowing,
following actions by Pharma Ltd. will require prior approval of the bank:
• Payment of dividends to the shareholders in cash or kind;
• Buyback of its own equity shares;
• Issue of bonus equity shares;
• Amalgamation of Pharma Ltd. with any other entity; and
• Obtaining additional loans from any entity.
Recently, the Board of Directors of Pharma Ltd. proposed a dividend of ₹ 5 per
share. However, when the CFO of Pharma Ltd. approached the bank for obtaining
their approval, the bank rejected the proposal citing concerns over the short-term
cash liquidity of Pharma Ltd. Having learned about the developments, the Directors
of Angel Ltd. along with the Directors of Little Angel Ltd. approached the bank
with a request to re-consider its decision. The Directors of Angel Ltd. and Little
Angel Ltd. urged the bank to approve a reduced dividend of at least ₹ 2 per share.
However, the bank categorically refused to approve any payout of dividend.
Under IGAAP, Angel Ltd. has classified Pharma Ltd. as its associate. As the
CFO of Angel Ltd., you are required to comment on the correct classification
of Pharma Ltd. on transition to Ind AS.

QUESTION 3

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 01:59:14)
(Question number in rtp: 14)

Gamma Limited, a parent company, is engaged in manufacturing and retail activities.

The group holds investments in different entities as follows:
• Gamma Limited holds 100% Investment in G Limited and D Limited;
• G Limited and D Limited hold 60% and 40% in GD Limited respectively;
• Delta Limited is a 100% subsidiary of GD Limited
Firstly, Gamma Limited wants you to suggest whether GD Limited can avail the
exemption from the preparation and presentation of consolidated financial
statements as per applicable Ind AS?
Secondly, if all other facts remain the same as above except that G Limited
and D Limited are both owned by an Individual (say, Mr. X) instead of Gamma
Limited, then explain whether GD Limited can avail the exemption from the
preparation and presentation of consolidated financial statements.
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QUESTION 4

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 04:27:19)
(Question number in Rtp: 19)

Solar Limited has an 80% interest in its subsidiary, Mars Limited. Solar Limited
holds a direct interest of 25% in Venus Limited. Mars Limited also holds a 30%
interest in Venus Limited. The decisions concerning relevant activities of Venus
Limited require a simple majority of votes. How should Solar Limited account for
its investment in Venus Limited in its consolidated financial statements?

QUESTION 5

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 04:12:25)
(Question number in Rtp: 18)

PP Ltd., a non-investment entity, is the parent of Praja Ltd. within the meaning of
Ind AS 110 ‘Consolidated Financial Statements’. The investment in Praja Ltd. was
carried in the separate financial statements of PP Ltd. at fair value with changes in
fair value recognised in the other comprehensive income. On 1st April, 20X2, PP
Ltd. qualifies as one that is an investment entity. Carrying amount of the investment
on 1st April, 20X2 was ₹ 8,00,000. The fair value of its investment in Praja Ltd was
₹ 10,00,000 on that date. PP Ltd had recognised in OCI an amount of ₹ 1,00,000 as
a previous fair value increase related to the investment in Praja Ltd.
How would PP Ltd account for the investment in Praja Ltd on the date of
change of its classification/status as an investment entity, in its separate
financial statements?
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TOPIC 14
EARNING PER SHARE
(IND AS 33)

QUESTION 1

(MTP 7 VIDEO OCTOBER 2021)

(TIMING IN VIDEO: 01:39:16) (7marks)
(Question number in mtp: 6B)

Sohan has been recently hired in Zio Life Limited. Since he is facing difficulty in
computation of EPS as per Ind AS 33, guide him by discussing the steps for the
calculation of Basic EPS and Diluted EPS along with the necessary computations
for EPS of Year 1.

The following basic facts relate to Company Zio Life Limited.

• Net profit for Year 1 is ` 46,00,000.

• The number of ordinary shares outstanding on 1st April Year 1 is

30,00,000. The following facts are also relevant for Year 1.

The following facts are also relevant for Year 1.

• On 1st April, Zio Life Limited issues 20,00,000 three-year term convertible
bonds for ` 1 each.

• Zio Life Limited has an option to settle the principal amount in ordinary shares
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(every 10 bonds are convertible into one ordinary share) or cash on settlement
date.

• The principal amount of the bonds is classified as an equity instrument and the
interest is classified as a financial liability.

• The interest expense relating to the liability component of the bonds is `

1,800. • The interest expense is tax-deductible. The applicable income tax rate

is 40%.

QUESTION 2

(MTP 9 VIDEO MARCH 2022)

(TIMING IN VIDEO: 00:10:27) (8marks)
(Question number in mtp: 1B)

The following information is available relating to Space India Limited for the Financial
Year 20X1-20X2.

Net profit attributable to equity shareholders ` 90,000

Number of equity shares outstanding 16,000
Average fair value of one equity share during the year ` 90

Potential Ordinary Shares:

Options 900 options with exercise price of ` 75

Convertible Preference Shares 7,500 shares entitled to a cumulative dividend of
` 9 per share. Each preference share is
convertible into 2 equity shares.
10% Convertible Debentures of ` 10,00,000 and each debenture is convertible
` 100 each into 4 equity shares
Tax rate 25%
You are required to compute Basic and Diluted EPS of the company for the
financial year 20X1-20X2.

QUESTION 3

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 03:25:48)
(Question number in rtp: 16)
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An entity issues 2,000 convertible bonds at the beginning of Year 1. The bonds have
a three-year term, and are issued at par with a face value of ₹ 1,000 per bond,
giving total proceeds of ₹ 2,000,000. Interest is payable annually in arrears at a
nominal annual interest rate of 6 per cent. Each bond is convertible at any time up
to maturity into 250 ordinary shares. The entity has an option to settle the principal
amount of the convertible bonds in ordinary shares or in cash.
When the bonds are issued, the prevailing market interest rate for similar debt
without a conversion option is 9 per cent. At the issue date, the market price of
one ordinary share is ₹ 3. Income tax is ignored.
Calculate basic and diluted EPS when
Profit attributable to ordinary equity holders of the parent ₹ 1,000,000
entity Year 1
Ordinary shares outstanding 1,200,000
Convertible bonds outstanding 2,000

QUESTION 4

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 02:01:18)
(Question number in rtp: 15)

CAB Limited is in the process of preparation of the consolidated financial

statements of the group for the year ending 31st March, 20X3 and the extract of
the same is as follows:
Particulars Attributable to Non- Total (₹
CAB Limited controlling in ‘000)
interest

Profit for the year 39,000 3,000 42,000

Other Comprehensive Income 5,000 Nil 5,000
Total Comprehensive Income 44,000 3,000 47,000

The long-term finance of the company comprises of the following:

(i) 20,00,00,000 equity shares at the beginning of the year and the company has
issued 5,00,00,000 shares on 1st July, 20X2 at full market value.
(ii) 8,00,00,000 irredeemable preference shares. These shares were in issue for
the whole of the year ended 31st March, 20X3. The dividend on these
preference shares is discretionary.
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(iii) ₹ 18 crores of 6% convertible debentures issued on 1st April, 20X1 and

repayable on 31st March, 20X5 at par. Interest is payable annually. As an
alternative to repayment at par, the holder on maturity can elect to exchange
their convertible debentures for 10 crores ordinary shares in the company. On
1st April, 20X1, the prevailing market interest rate for four-year convertible
debentures which had no right of conversion was 8%. Using an annual discount
rate of 8%, the present value of ₹ 1 payable in four years is 0.74 and the
cumulative present value of ₹ 1 payable at the end of years one to four is 3.31.
In the year ended 31st March, 20X3, CAB Limited declared an ordinary
dividend of 0.10 paise per share and a dividend of 0.05 paise per share on the
irredeemable preference shares.
Compute the following:
• the finance cost of convertible debentures and its closing balance as on 31st
March, 20X3 to be presented in the consolidated financial statements.
• the basic and diluted earnings per share for the year ended 31 st March,
20X3. Assume that income tax is applicable to CAB Limited and its
subsidiaries at 25%.

QUESTION 5

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 01:38:50)
(Question number in Rtp: 8)

Following information pertains to an entity for the year ending 31 st March 20X1:

Net profit for the year ₹ 12,00,000

Weighted average number of equity shares outstanding 5,00,000 shares
during the year
Average market price per share during the year ₹ 20

Weighted average number of shares under option during the 1,00,000 shares
year
Exercise price per share under option during the year ₹ 15

Calculate basic and diluted earnings per share.

QUESTION 6

(RTP VIDEO NOV. 2022)

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(TIMING IN VIDEO: 04:42:10)

(Question number in Rtp: 17)

Company S is a subsidiary of Company P. Following facts are in respect of Company

S:
• Company S has 10,000 ordinary shares and 1,000 options outstanding, of which
Company P owns 9,000 shares and 500 options, respectively.
• The options have an exercise price of ₹ 40.
• The average market price of Company S’s ordinary share was ₹ 50 in 20X1.
• In 20X1, Company S’s profit was ₹ 30,000. Following facts are in respect of
Company P:
• Company P has 5,000 ordinary shares outstanding.
• In 20X1, Company P’s profit (excluding any distributed and undistributed
earnings of subsidiaries) was ₹ 7,000.
• The options outstanding are dilutive at P’s level.
Determine the diluted EPS of Company P for the year 20X1. Ignore income tax.
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TOPIC 15
FOREIGN CURRENCY TRANSACTIONS
(IND AS 21)

QUESTION 1

(MTP 8 VIDEO NOVEMBER 2021)

(TIMING IN VIDEO: 00:02:02) (14marks)
(Question number in mtp: 1A)

PQR Holdings Limited is based in London and has Pound sterling ("GBP") as its
functional and presentation currency. On 1st April, 20X1, PQR Holdings Limited
incorporated PQR India Limited as its wholly owned subsidiary in India. PQR India
will be engaged in trading of items purchased from PQR Holdings. The shares of PQR
India, having a face value of ` 10 each amounting to total of ` 500 crore, were issued
to PQR Holdings in GBP on 1st April, 20X1.
PQR India has adopted Ind AS with effect from its incorporation. In accordance
with Ind AS, management of PQR India has concluded that its functional currency
is Indian Rupee ("INR"). Following is the summarized trial balance of PQR India as on
31st March, 20X2, being the reporting date of PQR India and PQR Holdings:

(Note: All amounts in the below mentioned trial balance are ` in crore)

S. No. Particulars Debit Credit

Balances Balances
1. Share capital - 500.0
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2. Securities premium reserve on issue of equity shares - 150.0

3. Retained earnings - 110.0
4. Long-term borrowings - 30.0
5. Deferred tax liability - 10.0
6. Income tax payable - 25.0
7. Import duty payable - 5.0
8. Employee benefits payable 7.5
9. Sundry trade payables - 2.5
10. Property, plant and equipment (net of depreciation) 550.0 -
11. Computer software (net of amortisation) 70.0 -
12. Inventories purchased on 15th March, 20X2 200.0
(there is no indicator of impairment)
13. Cash and bank balance 5.0 -
14. Sundry trade receivables 17.0 -
15. Allowance for doubtful trade receivables - 2.0
Total 842.0 842.0
Additional information relating to property, plant and equipment, and computer software:
Line item Date of acquisition
Property, plant and equipment 30th April, 20X1
Computer software 5th May, 20X1

PQR India has adopted the following accounting policy in relation to shareholders'
funds to translate equity:
Share capital To be translated using historical exchange rate
Securities premium To be translated using historical exchange rate
Retained earnings To be translated using average exchange rate

Since the presentation currency of PQR Holdings is GBP, PQR India is required to
translate its trial balance from INR to GBP. Following table provides relevant
foreign exchange rates:
Closing spot rate as on 1st April, 20X1 1 INR = 0.0123 GBP
Closing spot rate as on 30th April, 20X1 1 INR = 0.0120 GBP
Closing spot rate as on 5th May, 20X1 1 INR = 0.0119 GBP
Closing spot rate on 15th March, 20X2 1 INR = 0.0108 GBP
Closing spot rate as on 31st March, 20X2 1 INR = 0.0109 GBP
Average exchange rate for the year ended 31st March, 1 INR = 0.0116 GBP
20X2

As the accountant of PQR India, you are required to do the following for its separate
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financial statements:

(i) Explain the principle of monetary and non-monetary items.Based on this

principle, bifurcate the line items of the trial balance into monetary and
non-monetary items.
(ii) Translate the trial balance of PQR India from INR to GBP.

QUESTION 2

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 01:38:11)
(Question number in rtp: 5)

Supplier, A Ltd., enters into a contract with a customer, B Ltd., on 1st January,
2018 to deliver goods in exchange for total consideration of USD 50 million and
receives an upfront payment of USD 20 million on this date. The functional currency
of the supplier is INR. The goods are delivered and revenue is recognised on 31st
March, 2018. USD 30 million is received on 1st April, 2018 in full and final
settlement of the purchase consideration.
State the date of transaction for advance consideration and recognition of revenue.
Also state the amount of revenue in INR to be recognized on the date of recognition
of revenue. The exchange rates on 1st January, 2018 and 31st March, 2018 are ₹
72 per USD and ₹ 75 per USD respectively.

QUESTION 3

(RTP VIDEO NOV. 2019)

(TIMING IN VIDEO: 01:38:09)
(Question number in Rtp: 11)

Global Limited, an Indian company acquired on 30th September, 20X1 70% of the
share capital of Mark Limited, an entity registered as company in Germany. The
functional currency of Global Limited is Rupees and its financial year end is 31st
March, 20X2.
(i) The fair value of the net assets of Mark Limited was 23 million EURO and the
purchase consideration paid is 17.5 million EURO on 30th September, 20X1.
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The exchange rates as at 30th September, 20X1 was ₹ 82 / EURO and at 31st
March, 20X2 was ₹ 84 / EURO.
What is the value at which the goodwill has to be recognised in the financial
statements of Global Limited as on 31st March, 20X2?
(iii) Mark Limited sold goods costing 2.4 million EURO to Global Limited for 4.2
million EURO during the year ended 31st March, 20X2. The exchange rate on
the date of purchase by Global Limited was ₹ 83 / EURO and on 31st March,
20X2 was ₹ 84 / EURO. The entire goods purchased from Mark Limited are
unsold as on 31st March, 20X2. Determine the unrealised profit to be
eliminated in the preparation of consolidated financial statements.

QUESTION 4

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 00:30:35)
(Question number in Rtp: 17)

On 1st April, 20X1, Makers Ltd. raised a long term loan from foreign investors. The
investors subscribed for 6 million Foreign Currency (FCY) loan notes at par. It
incurred incremental issue costs of FCY 2,00,000. Interest of FCY 6,00,000 is
payable annually on 31st March, starting from 31st March, 20X2. The loan is
repayable in FCY on 31st March, 20X7 at a premium and the effective annual
interest rate implicit in the loan is 12%. The appropriate measurement basis for
this loan is amortised cost. Relevant exchange rates are as follows:
- 1st April, 20X1 - FCY 1 = ₹ 2.50.
- 31st March, 20X2 – FCY 1 = ₹ 2.75.
- Average rate for the year ended 31st Match, 20X2 – FCY 1 = ₹ 2.42. The
functional currency of the group is Indian Rupee.

What would be the appropriate accounting treatment for the foreign

currency loan in the books of Makers Ltd. for the FY 20X1-20X2? Calculate
the initial measurement amount for the loan, finance cost for the year,
closing balance and exchange gain / loss.
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TOPIC 16
ESTIMATES, ERRORS & POLICIES
(IND AS 8)

QUESTION 1

(MTP 8 VIDEO NOVEMBER 2021)

(TIMING IN VIDEO: 00:22:15) (6marks)
(Question number in mtp: 1B) (IND AS MIXED WITH IND AS 16)

Given the decreased revenue in financial year 20X1 -20X2 management of PQR
Ltd. is keen to identify ways to reduce the overall impact on profit and loss. A
consultant has suggested that they could explore changing the basis of
depreciation from SLM to hours in use but not entirely sure if this is permitted.
Annual depreciation charge for financial year 20X1-20X2 would be ` 25 lacs using
SLM and ` 7 lacs using new method. This difference is significant for PQR Ltd. s
financial statements.
What are the considerations in determining whether a change in depreciation
methodology is appropriate, and how should this change be accounted for? Given
the risk of charging lower depreciation per annum and the possibility that the
asset will be depreciated over a period longer than it would otherwise be (under
SLM basis), what other safeguards do you suggest, in order to ensure compliance
with relevant standards in Ind AS and its framework?

QUESTION 2
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(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 03:11:04)
(Question number in rtp: 13)

ABC Ltd. changed its method adopted for inventory valuation in the year 2018-2019.
Prior to the change, inventory was valued using the first in first out method (FIFO).
However, it was felt that in order to match current practice and to make the
financial statements more relevant and reliable, a weighted average valuation model
would be more appropriate.
The effect of the change in the method of valuation of inventory was as follows:
• 31st March, 2017 - Increase of ₹ 10 million
• 31st March, 2018 - Increase of ₹ 15 million
• 31st March, 2019 - Increase of ₹ 20 million
Profit or loss under the FIFO valuation model are as follows:

2018-2019 2017-2018
Revenue 324 296
Cost of goods sold (173) (164)
Gross profit 151 132
Expenses (83) (74)

Profit 68 58
Retained earnings at 31st March, 2017 were ₹ 423 million
Present the change in accounting policy in the profit or loss and produce an
extract of the statement of changes in equity in accordance with Ind AS 8.

QUESTION 3

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 03:50:37)
(Question number in Rtp: 3)

In 20X3-20X4, after the entity’s 31 March 20X3 annual financial statements were
approved for issue, a latent defect in the composition of a new product
manufactured by the entity was discovered (that is, a defect that could not be
discovered by reasonable or customary inspection). As a result of the latent defect
the entity incurred ₹100,000 in unanticipated costs for fulfilling its warranty
obligation in respect of sales made before 31 March 20X3. An additional ₹20,000
was incurred to rectify the latent defect in products sold during 20X3-20X4
before the defect was detected and the production process rectified, ₹5,000 of
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which relates to items of inventory at 31 March 20X3. The defective inventory was
reported at cost ₹ 15,000 in the 20X2-20X3 financial statements when its selling
price less costs to complete and sell was estimated at ₹18,000. The accounting
estimates made in preparing the 31 March 20X3 financial statements were
appropriately made using all reliable information that the entity could reasonably
be expected to have been obtained and taken into account in the preparation and
presentation of those financial statements.
Analyse the above situation in accordance with relevant Ind AS.

TOPIC 17
GOVT. GRANTS
(IND AS 20)

QUESTION 1

(MTP 8 VIDEO NOVEMBER 2021)

(TIMING IN VIDEO: 00:34:35) (4marks)
(Question number in mtp: 3B)

Entity A is awarded a government grant of ` 60,000 receivable over three years (`40,000
in year 1 and ` 10,000 in each of years 2 and 3), contingent on creating 10 new jobs and
maintaining them for three years. The employees are recruited at a total cost of `
30,000, and the wage bill for the first year is ` 1,00,000, rising by `10,000 in each of
the subsequent years. Calculate the grant income and deferred income to be accounted
for in the books for year 1, 2 and 3.

QUESTION 2

(MTP 9 VIDEO MARCH 2022)

(TIMING IN VIDEO: 01:19:33) (6marks)
(Question number in mtp: 5B)
M Limited had constructed another factory few years ago with the assistance of yet
another government grant, 'Innovative Product'. The grant is non-repayable and,
following the construction of the factory, cannot be clawed back by the government.
There are no further conditions attached to the grant that the Company is required
to satisfy. The grant received has been treated as deferred income and is being
credited to the income statement over the same period as the factory is being
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depreciated. Following an adverse change in the demand of the product the factory
manufactures, during the year at the reporting date, the directors have concluded
that the factory's carrying value is no longer recoverable in full and that a write
down for impairment is required. The write down is more than covered by the
amortized deferred income balance related to the grant.
Discuss, in the context of Ind AS framework and Ind AS 20, the impairment of the
factory for which 'Innovative Product' government grant, has been received. Would
your answer be different, if there are further conditions attached to grant beyond
construction of factory?

QUESTION 3

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 01:15:28)
(Question number in Rtp: 3)

Entity A is awarded a government grant of ₹60,000 receivable over three years

(₹40,000 in year 1 and ₹10,000 in each of years 2 and 3), contingent on creating 10
new jobs and maintaining them for three years. The employees are recruited at a
total cost of ₹30,000, and the wage bill for the first year is ₹ 1,00,000, rising by
₹10,000 in each of the subsequent years. Calculate the grant income and deferred
income to be accounted for in the books for year 1, 2 and 3.

QUESTION 4

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 01:09:12)
(Question number in Rtp: 6)

A Ltd. has been conducting its business activities in backward areas of the country
and due to higher operating costs in such regions, it has collectively incurred huge
losses in previous years. As per a scheme of government announced in March 20X1,
the company will be partially compensated for the losses incurred by it to the
extent of ₹ 10,00,00,000, which will be received in October 20X1. The compensation
being paid by the government meets the definition of government grant as per Ind
AS 20. Assume that no other conditions are to be fulfilled by the company to
receive the compensation.
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When should the grant be recognised in statement of profit and loss? Discuss in light of
relevant Ind AS.

QUESTION 5

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 03:25:51)
(Question number in Rtp: 13)

A Limited is engaged in the manufacturing of certain specialized chemicals. During

the manufacturing process, certain wastewater is produced which is released by A
Limited in the nearby river. To reduce pollution of the rivers, the state government
has introduced a scheme with the following salient features:
• If a manufacturer installs certain pre-approved wastewater treatment plant,
the government will provide an interest free loan equal to 50% of the cost of
the plant;
• Such loan will be repayable to the government in 5 years from the date of
disbursal;
• The manufacturer availing the benefit of this scheme must treat the
wastewater of its factory using the specified plant before releasing it to the
river. If this condition is violated, the entire loan shall become immediately
repayable to the government along with a penalty of ₹ 10 lakh.
Cost of the wastewater treatment plant to be installed to avail the benefit of the
scheme is ₹ 50 lakh. A Limited decided to utilise this scheme because, if it were to
obtain the similar loan from a bank, it would be available at a market interest rate
of 12% per annum. Accordingly, A Limited applied for and obtained the government
loan of ₹ 25 lakh on 1st April, 20X1. A Limited purchased and installed the plant
such that it became ready for use on the same date.
A Limited has an accounting policy of recognising government grant in relation to
depreciable assets in the proportion of depreciation expense. It has determined
that the plant will be depreciated over a period of 5 years using straight-line
method. In the month of March, 20X3, government officials conducted a surprise
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audit, and it was found that A Limited was not using the wastewater treatment
plant as prescribed. Accordingly, on 31st March, 20X3, the government ordered A
Limited to repay the entire loan along with penalty. A Limited repaid the loan with
interest and penalty as per the order on 31st March, 20X3.
Measure the amount of government grant as on 1st April, 20X1. Determine
the nature of the government grant and its accounting treatment
(principally) for the year ended 31st March, 20X2. Also determine the
impact on profit or loss if any, on account of revocation of government grant
as on 31st March, 20X3.

QUESTION 6

(RTP VIDEO NOV 2022)

(TIMING IN VIDEO: 01:49:34)
(Question number in Rtp: 3)

To encourage entities to expand their operations in a specified development zone,

the government provides interest-free loans to fund the purchase of manufacturing
equipment.
In accordance with the development scheme, an entity receives an interest -free
loan of ₹ 5,00,000 from the government for a period of three years. The market
rate of interest for similar loans for 3 years is 5% per year.
There are no future performance conditions attached to the interest -free loan.
Discuss how to account for the above loan. Pass necessary journal entries in the
entity’s books of accounts from year 1 to year 3, as per relevant Ind AS.
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TOPIC 18
REVENUES FROM CUSTOMERS
(IND AS 115)

QUESTION 1

(MTP 9 VIDEO MARCH 2022)

(TIMING IN VIDEO: 01:13:51) (4marks)
(Question number in mtp: 4B)

During 20X1-20X2, XYZ Ltd. completed a large contract to supply a customized

equipment for one customer for a total consideration of ` 5,00,000 received fully in
cash. As a special arrangement and in order to procure the customer's order, XYZ
Ltd agreed to maintain the equipment for three years from the date of installation.
Had there been no maintenance requirement, the sale would have been for an amount
of ` 4,85,500. If maintenance alone was required, it would have cost the customer `
12,500 per annum.

Explain the requirements of Ind AS in relation to the XYZ Ltd.’s supply of customized
contract and the maintenance that has been agreed to be provided to the customer.
Ignore discounting and calculate the amounts to be recognized in the financial
statements as at 31 st March, 20X2.

QUESTION 2

(MTP 10 VIDEO APRIL 2022)

(TIMING IN VIDEO: 00:22:54) (4marks)
(Question number in mtp: 4B)
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A contractor enters into a contract with a customer to build an asset for `

1,00,000, with a performance bonus of ` 50,000 that will be paid based on the
timing of completion. The amount of the performance bonus decreases by 10%
per week for every week beyond the agreed-upon completion date. The contract
requirements are similar to those of contracts that the contractor has
performed previously, and management believes that such experience is
predictive for this contract. The contractor concludes that the expected value
method is most predictive in this case.

The contractor estimates that there is a 60% probability that the contract will
be completed by the agreed-upon completion date, a 30% probability that it will
be completed one week late, and a 10% probability that it will be completed two
weeks late.

QUESTION 3

(MTP 4 VIDEO MAY 2020)

(TIMING IN VIDEO: 00:51:20) (5marks)
(Question number in mtp: 6B)

An entity enters into a contract for the sale of Product A for Rs. 1,000, As part of the
contract, the entity gives the customer a 40%. discount voucher for any future purchases
up to Rs. 1,000 in next 30 days. The entity intends to offer a 10% discount on all sales
during the next 30 days. as part of a seasonal promotion. The 10% discount on all used in
addition to the 40% discount voucher.
The entity believes there is 80% likelihood that a customer will redeem the voucher and
on an average, a customer will purchase Rs. 500 of additional products:

Determine how many performance obligations does the entity have and their stand-alone
selling price and allocated transaction price?

QUESTION 4

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 01:07:26)
(Question number in rtp: 4)

KK Ltd. runs a departmental store which awards 10 points for every purchase of ₹
500 which can be discounted by the customers for further shopping with the same
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merchant. Each point is redeemable on any future purchases of KK Ltd.’s products

within 3 years . Value of each point is ₹ 0.50. During the accounting period 2017-
2018, the entity awarded 1,00,00,000 points to various customers of which
18,00,000 points remained undiscounted (to be redeemed till 31st March, 2020).
The management expects only 80% of the remaining will be discounted in future.
The Company has approached your firm with the following queries and has asked
you to suggest the accounting treatment (Journal Entries) under the applicable Ind
AS for these award points:

(a) How should the recognition be done for the sale of goods worth ₹ 10,00,000
on a particular day?

(b) How should the redemption transaction be recorded in the year 2017-2018?
The Company has requested you to present the sale of goods and redemption
as independent transaction. Total sales of the entity is ₹ 5,000 lakhs.
(c) How much of the deferred revenue should be recognised at the year-end
(2017- 2018) because of the estimation that only 80% of the outstanding
points will be redeemed?
(d) In the next year 2018-2019, 60% of the outstanding points were discounted
Balance 40% of the outstanding points of 2017-2018 still remained
outstanding. How much of the deferred revenue should the merchant
recognize in the year 2018-2019 and what will be the amount of balance
deferred revenue?
(e) How much revenue will the merchant recognized in the year 2019-2020, if
3,00,000 points are redeemed in the year 2019-2020?

QUESTION 5

(RTP VIDEO NOV. 2019)

(TIMING IN VIDEO: 02:33:29)
(Question number in Rtp: 6)

An entity G Ltd. enters into a contract with a customer P Ltd. for the sale of a
machinery for ₹20,00,000. P Ltd. intends to use the said machinery to start a food
processing unit. The food processing industry is highly competitive and P Ltd. has
very little experience in the said industry.
P Ltd. pays a non-refundable deposit of ₹1,00,000 at inception of the contract and
enters into a long-term financing agreement with G Ltd. for the remaining 95 per
cent of the agreed consideration which it intends to pay primarily from income
derived from its food processing unit as it lacks any other major source of income.
The financing arrangement is provided on a non-recourse basis, which means that if
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P Ltd. defaults then G Ltd. can repossess the machinery but cannot seek further
compensation from P Ltd., even if the full value of the amount owed is not recovered
from the machinery. The cost of the machinery for G Ltd. is ₹ 12,00,000. P Ltd.
obtains control of the machinery at contract inception.
When should G Ltd. recognise revenue from sale of machinery to P Ltd. in
accordance with Ind AS 115?

QUESTION 6

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 02:45:04)
(Question number in Rtp: 18)

(a) Entity I sells a piece of machinery to the customer for ₹ 2 million, payable in
90 days. Entity I is aware at contract inception that the customer might not
pay the full contract price. Entity I estimates that the customer will pay at
least ₹ 1.75 million, which is sufficient to cover entity I's cost of sales (₹ 1.5
million) and which entity I is willing to accept because it wants to grow its
presence in this market. Entity I has granted similar price concessions in
comparable contracts.
Entity I concludes that it is highly probable that it will collect ₹ 1.75 million,
and such amount is not constrained under the variable consideration guidance.
What is the transaction price in this arrangement?
(b) On 1 January 20x8, entity J enters into a one-year contract with a customer
to deliver water treatment chemicals. The contract stipulates that the price
per container will be adjusted retroactively once the customer reaches certain
sales volume, defined, as follows:

Price per container Cumulative sales volume

₹ 100 1 - 1,000,000 containers

₹ 90 1,000,001 - 3,000,000 containers

₹ 85 3,000,001 containers and above
Volume is determined based on sales during the calendar year. There are no
minimum purchase requirements. Entity J estimates that the total sales
volume for the year will be 2.8 million containers, based on its experience with
similar contracts and forecasted sales to the customer.
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Entity J sells 700,000 containers to the customer during the first quarter
ended 31 March 20X8 for a contract price of ₹ 100 per container.
How should entity J determine the transaction price?
(c) Entity K sells electric razors to retailers for C 50 per unit. A rebate coupon
is included inside the electric razor package that can be redeemed by the end
consumers for C 10 per unit.
Entity K estimates that 20% to 25% of eligible rebates will be redeemed,
based on its experience with similar programmes and rebate redemption rates
available in the market for similar programmes. Entity K concludes that the
transaction price should incorporate an assumption of 25% rebate redemption,
as this is the amount for which it is highly probable that a significant reversal
of cumulative revenue will not occur if estimates of the rebates change.
How should entity K determine the transaction price?
(d) A manufacturer enters into a contract to sell goods to a retailer for ₹ 1,000.
The manufacturer also offers price protection, whereby it will reimburse the
retailer for any difference between the sale price and the lowest price
offered to any customer during the following six months. This clause is
consistent with other price protection clauses offered in the past, and the
manufacturer believes that it has experience which is predictive for this
contract.
Management expects that it will offer a price decrease of 5% during the price
protection period. Management concludes that it is highly probable that a
significant reversal of cumulative revenue will not occur if estimates change.
How should the manufacturer determine the transaction price?

QUESTION 7

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 01:36:50)
(Question number in Rtp: 6)

A contractor enters into a contract with a customer to build an asset for ₹ 1,00,000,
with a performance bonus of ₹ 50,000 that will be paid based on the timing of
completion. The amount of the performance bonus decreases by 10% per week for
every week beyond the agreed-upon completion date. The contract requirements
are similar to those of contracts that the contractor has performed previously, and
management believes that such experience is predictive for this contract. The
contractor concludes that the expected value method is most predictive in this
case.
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The contractor estimates that there is a 60% probability that the contract will be
completed by the agreed-upon completion date, a 30% probability that it will be
completed one week late, and a 10% probability that it will be completed two weeks
late.
Determine the transaction price.

QUESTION 8

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 04:15:45)
(Question number in Rtp: 10)

A property sale contract includes the following:

(a) Common areas
(b) Construction services and building material
(c) Property management services
(d) Golf membership
(e) Car park
(f) Land entitlement
Analyse whether the above items can be considered as separate performance
obligations as per the requirements of Ind AS 115?

QUESTION 9

(RTP VIDEO NOV. 2022)

(TIMING IN VIDEO: 03:51:37)
(Question number in Rtp: 13)

A Ltd. owns 20 resorts across India. Every customer who stays in any of the
resorts owned by A Ltd. is entitled to get points on the basis of total amount paid
by him. Under this scheme, 1 point is granted for every ₹ 100 spent for stay in
the resort. As per the past experience of A Ltd., the likelihood of exercise of
the points is 100% and the standalone price of each such point is ₹ 5. Customer X
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spends ₹ 10,000 in one of the resorts of A Ltd. What is the accounting treatment
for the points granted by A Ltd.?

TOPIC 19
INESTMENT PROPERTY
(IND AS 40)

QUESTION 1

(MTP 10 VIDEO APRIL 2022)

(TIMING IN VIDEO: 00:05:23) (6marks)
(Question number in mtp: 2A)

On 1st April, 20X1, an entity purchased an office block (building) for ` 50,00,000
and paid a non refundable property transfer tax and direct legal cost of `
2,50,000 and ` 50,000 respectively while acquiring the building.
During 20X1, the entity redeveloped the building into two-story building.
Expenditures on re development were:
• ` 1,00,000 on Building plan approval;
• ` 10,00,000 on construction costs (including ` 60,000 refundable purchase
taxes); and

• ` 40,000 was due to abnormal wastage of material and labour.

When the re-development of the building was completed on 1st October, 20X1,
the entity rents out Ground Floor of the building to its subsidiary under an
operating lease in return for rental payment. The subsidiary uses the building as
a retail outlet for its products. The entity kept first floor for its own
administration and maintenance staff usage. Equal value can be attributed to each
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floor.

How will the entity account for all the above mentioned expenses in the books of
account as on 1st October, 20X1?
Also, discuss how the above building will be shown in the consolidated financial
statements of the entity as a group and in its separate financial statements as per
relevant Ind AS.

QUESTION 2
(BEST QUESTION)

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 02:07:56)
(Question number in Rtp: 20)

Shaurya Limited owns Building A which is specifically used for the purpose of
earning rentals. The Company has not been using the building A or any of its
facilities for its own use for a long time. The company is also exploring the
opportunities to sell the building if it gets the reasonable amount in consideration.
Following information is relevant for Building A for the year ending 31 st March,
2020:
Building A was purchased 5 years ago at the cost of ₹10 crore and building life is
estimated to be 20 years. The company follows straight line method for
depreciation.
During the year, the company has invested in another Building B with the purpose
to ho ld it for capital appreciation. The property was purchased on 1st April, 2019
at the cost of ₹ 2 crore. Expected life of the building is 40 years. As usual, the
company follows straight line method of depreciation.
Further, during the year 2019-2020, the company earned / incurred following
direct operating expenditure relating to Building A and Building B:
Rental income from Building A = ₹ 75 lakh
Rental income from Building B = ₹ 25 lakh
Sales promotion expenses = ₹ 5 lakh
Fees & Taxes = ₹ 1 lakh
Ground rent = ₹ 2.5 lakh
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Repairs & Maintenance = ₹ 1.5 lakh

Legal & Professional = ₹ 2 lakh
Commission and brokerage = ₹ 1 lakh
The company does not have any restrictions and contractual obligations against
buildings - A and B. For complying with the requirements of Ind AS, the management
sought an independent report from the specialists so as to ascertain the fair value
of buildings A and B. The independent valuer has valued the fair value of property
as per the valuation model recommended by International valuation standards
committee. Fair value has been computed by the method by streamlining present
value of future cash flows namely, discounted cash flow method.
The other key inputs for valuation are as follows:
The estimated rent per month per square feet for the period is expected to be in
the range of ₹ 50 - ₹ 60. It is further expected to grow at the rate of 10 percent
per annum for each of 3 years. The weighted discount rate used is 12% to 13%.
Assume that the fair value of properties based on discounted cash flow method is
measured at ₹ 10.50 crore on 31st March, 2020.
What would be the treatment of Building A and Building B in the balance sheet of
Shaurya Limited? Provide detailed disclosures and computations in line with
relevant Indian accounting standards. Treat it as if you are preparing a separate
note or schedule, of the given assets in the balance sheet.

QUESTION 3

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 02:02:17)
(Question number in Rtp: 9)

X Ltd owned a land property whose future use was not determined as at 31 March
20X1. How should the property be classified in the books of X Ltd as at 31 March
20X1?
During June 20X1, X Ltd commenced construction of office building on it for own
use. Presuming that the construction of the office building will still be in progress
as at 31 March 20X2
(a) How should the land property be classified by X Ltd in its financial statements
as at 31 March 20X2?
(b) Will there be a change in the carrying amount of the property resulting from
any change in use of the investment property?
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(c) Whether the change in classification to, or from, investment properties is a

change in accounting policy to be accounted for in accordance with Ind AS 8,
Accounting Policies, Changes in Accounting Estimates and Errors?
(d) Would your answer to (a) above be different if there were to be a
management intention to commence construction of an office building
for own use; however, no construction activity was planned by 31 March
20X2?

QUESTION 4

(RTP VIDEO NOV. 2022)

(TIMING IN VIDEO: 04:20:04)
(Question number in Rtp: 19)

An entity owns a two-storey building. Floor 1 is rented out to independent third

parties under operating leases. Floor 2 is occupied by the entity’s administration
and maintenance staff. The entity can measure reliably the fair value of each
floor of the building without undue cost or effort. How the same will be classified
/ presented in the balance sheet as per relevant Ind AS. What will be the
accounting treatment as per relevant Ind AS on initial and subsequent date?
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TOPIC 20
CAPITALISATION OF BORROWING COST
(IND AS 23)

QUESTION 1

(MTP 10 VIDEO APRIL 2022)

(TIMING IN VIDEO: 00:30:24) (6marks)
(Question number in mtp: 6A)

ABC Ltd. has taken a loan of USD 20,000 on 1st April, 20X1 for constructing a
plant (qualifying asset) at an interest rate of 5% per annum payable on annual
basis.
On 1st April, 20X1, the exchange rate between the currencies i.e. USD vs Rupees
was ` 45 per USD. The exchange rate on the reporting date i.e. 31st March, 20X2
is ` 48 per USD.
The corresponding amount could have been borrowed by ABC Ltd. from State
Bank of India in local currency at an interest rate of 11% per annum as on 1st April,
20X1.

Compute the total borrowing cost to be capitalized for the construction of plant
by ABC Ltd. for the period ending 31st March, 20X2. Also explain the accounting
treatment of exchange loss incurred in the due process
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QUESTION 2

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 02:18:38)
(Question number in Rtp: 7)

How will you capitalise the interest when qualifying assets are funded by borrowings
in the nature of bonds that are issued at discount?
Y Ltd. issued at the start of year 1, 10% (interest paid annually and having maturity
period of 4 years) bonds with a face value of ₹ 2,00,000 at a discount of 10% to
finance a qualifying asset which is ready for intended use at the end of year 2.
Compute the amount of borrowing costs to be capitalized if the company
amortizes discount using Effective Interest Rate method by applying 13.39%
p.a. of EIR.

QUESTION 3

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 01:40:58)
(Question number in Rtp: 9)

Nikka Limited has obtained a term loan of ₹ 620 lacs for a complete renovation and
modernisation of its Factory on 1st April, 20X1. Plant and Machinery was acquired
under the modernisation scheme and installation was completed on 30th April,
20X2. An expenditure of ₹ 510 lacs was incurred on installation of Plant and
Machinery, ₹ 54 lacs has been advanced to suppliers for additional assets (acquired
on 25th April, 20X1) which were also installed on 30th April, 20X2 and the balance
loan of ₹ 56 lacs has been used for working capital purposes. Management of Nikka
Limited considers the 12 months period as substantial period of time to get the
asset ready for its intended use.
The company has paid total interest of ₹ 68.20 lacs during financial year
20X1-20X2 on the above loan. The accountant seeks your advice how to
account for the interest paid in the books of accounts. Will your answer be
different, if the whole process of renovation and modernization gets
completed by 28 th February, 20X2?

QUESTION 4
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(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 01:20:27)
(Question number in Rtp: 7)

X Ltd. commenced the construction of a plant (qualifying asset) on 1st September,

20X1, estimated to cost ₹ 10 crores. For this purpose, X has not raised any specific
borrowings, rather it intends to use general borrowings, which have a weighted
average cost of 11%. Total borrowing costs incurred during the period, viz., 1st
September, 20X1 to 31st March, 20X2 were ₹ 0.5 crore.
The other relevant details are as follows: (₹ in crore)

Month Cost of construction Cash outflows (paid in

Accrued advance at the start of
each month)

September 1.50 3.00

October 0.50 1.70
November 1.50 2.50
December 0.50 -
January 1.80 1.00
February 0.70 -
March 3.00 1.50
Based on the above information, discuss the treatment of borrowing cost
as per cash outflow basis and accrual basis and also suggest the appropriate
amount of interest that should be capitalised to the cost of the plant in
the financial statements for the year ended 31st March, 20X2?
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TOPIC 21
OPERATING SEGMENT
(IND AS 108)

QUESTION 1

(MTP 3 VIDEO OCTOBER 2019)

(TIMING IN VIDEO: 00:08:14) (5marks)
(Question number in mtp: 3A)

X Ltd. has identified 4 operating segments for which revenue data is given below:
External Sale (Rs.) Internal Sale (Rs.) Total (Rs.)

Segment A 30,00,000 Nil 30,00,000

Segment B 6,50,000 Nil 6,50,000
Segment C 8,50,000 1,00,000 9,50,000
Segment D 5,00,000 49,00,000 54,00,000
Total Sales 50,00,000 50,00,000 1,00,00,000

Additional information:
Segment C is a new business unit management expect this segment to make a significant
contribution to external revenue in coming years.
Which of the segments would be reportable under the criteria identified Ind AS 108?
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QUESTION 2

(RTP VIDEO MAY 2019)

(TIMING IN VIDEO: 03:40:46)
(Question number in rtp: 20)

An entity uses the weighted average cost formula to assign costs to inventories and
cost of goods sold for financial reporting purposes, but the reports provided to the
chief operating decision maker use the First-In, First-Out (FIFO) method for
evaluating the performance of segment operations. Which cost formula should be
used for Ind AS 108 disclosure purposes?

Ans. The entity should use First-In, First-Out (FIFO) method for its Ind AS 108
disclosures, even though it uses the weighted average cost formula for measuring
inventories for inclusion in its financial statements. Where chief operating decision
maker uses only one measure of segment asset, same measure should be used to
report segment information. Accordingly, in the given case, the method used in
preparing the financial information for the chief operating decision maker should
be used for reporting under Ind AS 108.
However, reconciliation between the segment results and results as per financial
statements needs to be given by the entity in its segment report.

QUESTION 3

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 01:08:05)
(Question number in rtp: 7)

ABC Limited has 5 operating segments namely A, B, C, D and E. The profit/ loss of
respective segments for the year ended March 31, 20X1 are as follows:

Segment Profit/(Loss) (₹ in
crore)
A 780
B 1,500
C (2,300)
D (4,500)
E 6,000

Total 1,480
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Based on the quantitative thresholds, which of the above segments A to E would be

considered as reportable segments for the year ending March 31, 20X1?

TOPIC 22
Valuation of Inventories
(IND AS 2)

QUESTION 1

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 00:01:21)
(Question number in rtp: 1)

The following is relevant information for an entity :

• Full capacity is 10,000 labour hours in a year.
• Normal capacity is 7,500 labour hours in a year.
• Actual labour hours for current period are 6,500 hours.
• Total fixed production overhead is ₹ 1,500.
• Total variable production overhead is ₹ 2,600.
• Total opening inventory is 2,500 units.
• Total units produced in a year are 6,500 units.
• Total units sold in a year are 6,700 units.
• The cost of inventories is assigned by using FIFO cost formula.
How overhead costs are to be allocated to cost of goods sold and closing inventory?

QUESTION 2
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(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 03:24:06)
(Question number in Rtp: 12)

A company normally produced 1,00,000 units of a high precision equipment each year
over past several years. In the current year, due to lack of demand and competition,
it produced only 50,000 units. Further information is as follows:
Material = ₹ 200 per unit;
Labour = ₹ 100 per unit;
Variable manufacturing overhead = ₹ 100 per unit;
Fixed factory production overhead =₹ 1,00,00,000;
Fixed factory selling overhead = ₹ 50,00,000;
Variable factory selling overhead = ₹ 150 per unit.
Calculate the value of inventory per unit in accordance with Ind AS 2. What will be
the treatment of fixed manufacturing overhead?

QUESTION 3

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 03:44:18)
(Question number in Rtp: 2)

On 1 January 20X1 an entity accepted an order for 7,000 custom-made corporate

gifts.
On 3 January 20X1 the entity purchased raw materials to be consumed in the
production process for ₹ 5,50,000, including ₹ 50,000 refundable purchase taxes.
The purchase price was funded by raising a loan of ₹ 5,55,000 (including ₹ 5,000
loan-raising fees). The loan is secured by the inventories.
During January 20X1 the entity designed the corporate gifts for the customer.
Design costs included:
• cost of external designer = ₹ 7,000; and
• labour = ₹ 3,000.
During February 20X1 the entity’s production team developed the manufacturing
technique and made further modifications necessary to bring the inventories to the
conditions specified in the agreement. The following costs were incurred in the
testing phase:
• materials, net of ₹ 3,000 recovered from the sale of the scrapped output = ₹
21,000;
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• labour = ₹ 11,000; and

• depreciation of plant used to perform the modifications = ₹ 5,000.
During February 20X1 the entity incurred the following additional costs in
manufacturing the customised corporate gifts:
• consumable stores = ₹ 55,000;
• labour = ₹ 65,000; and
• depreciation of plant used to manufacture the customised corporate gifts = ₹
15,000.
The customised corporate gifts were ready for sale on 1 March 20X1. No abnormal
wastage occurred in the development and manufacture of the corporate gifts.
Compute the cost of the inventory? Substantiate your answer with
appropriate reasons and calculations, wherever required.

QUESTION 4 (MIXED WITH IND AS 16)

(RTP VIDEO NOV. 2022)

(TIMING IN VIDEO: 04:25:39)
(Question number in Rtp: 16)

(i) A retailer company imported goods at a cost of ₹ 1,30,000 including ₹ 20,000

non-refundable import duties and ₹ 10,000 refundable purchase taxes. The
risks and rewards of ownership of the imported goods were transferred to
the retailer company upon collection of the goods from the harbour warehouse.
The retailer company was required to pay for the goods upon collection. The
retailer company incurred ₹ 5,000 to transport the goods to its retail outlet
and a further ₹ 2,000 in delivering the goods to its customer. Further selling
costs of ₹ 3,000 were incurred in selling the goods.
State whether delivery charges and selling expenses will form part of the cost
of inventory. If not, then why? Also calculate the cost of inventory.
(ii) Company A incurred ₹ 20,000 as cost for restoring the site on which the item
of PPE was located. This item was used for manufacturing of goods and the
requirement for restoring will arise due to manufacturing of goods.
What will the treatment of this ₹ 20,000 in the books of Company A? Analyse on
the basis of the provisions of relevant Ind AS.
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TOPIC 23
Investment in Associates
(IND AS 28)

QUESTION 1

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 00:50:49)
(Question number in rtp: 5)

An entity P (parent) has two wholly-owned subsidiaries - X and Y, each of which has
an ownership interest in an 'associate', entity Z. Subsidiary X is a venture capital
organisation. Neither of the investments held in associate Z by subsidiaries X and
Y is held for trading. Subsidiary X and Y account for their investment in associate
Z at fair value through profit or loss in accordance with Ind AS 109 and using the
equity method in accordance with Ind AS 28 respectively.
How should P account for the investment in associate Z in the following scenarios:
Scenario 1: Where both investments in the associate result in significant influence
on a stand-alone basis - Subsidiary X and Y ownership interest in associate Z is 25%
and 20% respectively.
Scenario 2: When neither of the investments in the associate results in significant
influence on a stand-alone basis, but do provide the parent with significant influence
on a combined basis - Subsidiary X and Y ownership interest in associate Z is 10%
each.
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Scenario 3: When one of the investments in the associate results in significant

influence on a stand-alone basis and the other investment in the associate does not
result in significant influence on a stand-alone basis - Subsidiary X and Y ownership
interest in associate Z is 30% and 10% respectively.
Assume there is significant influence if the entity has 20% or more voting rights.

QUESTION 2

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 01:01:27)
(Question number in Rtp: 2)

On 1st April 2019, Investor Ltd. acquires 35% interest in another entity, XYZ Ltd.
Investor Ltd. determines that it is able to exercise significant influence over XYZ
Ltd. Investor Ltd. has paid total consideration of ₹ 47,50,000 for acquisition of its
interest in XYZ Ltd. At the date of acquisition, the book value of XYZ Ltd.’s net
assets was ₹ 90,00,000 and their fair value was ₹ 1,10,00,000. Investor Ltd. has
determined that the difference of ₹ 20,00,000 pertains to an item of property,
plant and equipment (PPE) which has remaining useful life of 10 years.
During the year, XYZ Ltd. made a profit of ₹ 8,00,000. XYZ Ltd. paid a dividend of
₹ 12,00,000 on 31st March, 2020. XYZ Ltd. also holds a long-term investment in
equity securities. Under Ind AS, investment is classified as at FVTOCI in
accordance with Ind AS 109 and XYZ Ltd. recognized an increase in value of
investment by ₹ 2,00,000 in OCI during the year. Ignore deferred tax implications,
if any.
Calculate the closing balance of Investor Ltd.’s investment in XYZ Ltd. as at
31st March, 2020 as per the relevant Ind AS.
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TOPIC 24
RETIREMENT BENEFITS
(IND AS 19)

QUESTION 1

(RTP VIDEO NOV. 2019)

(TIMING IN VIDEO: 02:08:19)
(Question number in Rtp: 9)

(All numbers in ₹ ’000 unless otherwise stated)

ABL Ltd. operates a defined retirement benefits plan on behalf of current
and former employees. ABL Ltd. receives advice from actuaries regarding
contribution levels and overall liabilities of the plan to pay benefits. On 1st April,
20X1, the actuaries advised that the present value of the defined benefit
obligation was ₹ 60,000. On the same date, the fair value of the assets of the
defined benefit plan was ₹ 52,000. On 1st April, 20X1, the annual market yield on
high quality corporate bonds was 5%. During the year ended 31st March 20X2,
ABL Ltd. made contributions of ₹ 7,000 into the plan and the plan paid out
benefits of ₹ 4200 to retired members. Assume that both these payments were
made on 31st March 20X2. The actuaries advised that the current service cost
for the year ended 31st March 20X2 was ₹ 6,200. On 28th February, 20X2, the
rules of the plan were amended with retrospective effect. These amendments
meant that the present value of the defined benefit obligation was increased by
₹ 1500 from that date. During the year ended 31st March, 20X2, ABL Ltd. was in
negotiation with employee representatives regarding planned redundancies. The
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negotiations were completed shortly before the year end and redundancy
packages were agreed. The impact of these redundancies was to reduce the
present value of the defined benefit obligation by ₹ 8000. Before 31st March,
20X2, ABL Ltd. made payments of ₹ 7500 to the employees affected by the
redundancies in compensation for the curtailment of their benefits. These
payments were made out of the assets of the retirement benefits plan. On 31st
March, 20X2, the actuaries advised that the present value of the defined benefit
obligation was ₹ 68,000. On the same date, the fair value of the assets of the
defined benefit plan were ₹ 56,000.

QUESTION 2

(RTP VIDEO MAY 2020)

(TIMING IN VIDEO: 01:45:30)
(Question number in rtp: 12)

On 1 April 20X1, the fair value of the assets of XYZ Ltdʼs defined benefit plan
were valued at ₹ 20,40,000 and the present value of the defined obligation was ₹
21,25,000. On 31st March,20X2 the plan received contributions from XYZ Ltd
amounting to ₹ 4,25,000 and paid out benefits of ₹ 2,55,000. The current service
cost for the financial year ending 31 March 20X2 is ₹ 5,10,000. An interest rate of
5% is to be applied to the plan assets and obligations. The fair value of the planʼs
assets at 31 March 20X2 was ₹ 23,80,000, and the present value of the defined
benefit obligation was ₹ 27,20,000. Provide a reconciliation from the opening
balance to the closing balance for Plan assets and Defined benefit obligation. Also
show how much amount should be recognised in the statement of profit and loss,
other comprehensive income and balance sheet?

QUESTION 3

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 00:34:10)
(Question number in Rtp: 18)

At 1 April, 20X0, the fair value of the Plan Assets was ₹ 10,00,000. The Plan paid
benefits of ₹ 1,90,000 and received contributions of ₹ 4,90,000 on 30 September,
20X0. The company computes the Fair Value of Plan Assets to be ₹ 15,00,000 as on
31 March, 20X1 and the Present Value of the Defined Benefit Obligation to amount
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to ₹ 14,79,200 on the same date. Actuarial losses on defined benefit obligation were
₹ 6,000.
Compounding happens half-yearly. The normal interest rate for 6 months period is
10% per annum, while the effective interest rate for 12 months period is based on
the following data:
At 1 April, 20X0, the company made the following estimates based on market prices
at that date:

Particulars %

Interest and Dividend Income, after tax payable by the fund 9.25

Add: Realized and Unrealized Gains on Plan Assets (after tax) 2.00
Less: Administration Costs (1.00)

Expected Rate of Return 10.25

Determine actual return and expected return on plan asset. Also compute amount
to be recognized in ‘Other Comprehensive Income’ in this case.
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TOPIC 25
RELATED PARTIES
(IND AS 24)

QUESTION 1

(RTP VIDEO NOV. 2019)

(TIMING IN VIDEO: 01:10:24)
(Question number in Rtp: 15)

Uttar Pradesh State Government holds 60% shares in PQR Limited and 55% shares
in ABC Limited. PQR Limited has two subsidiaries namely P Limited and Q Limited.
ABC Limited has two subsidiaries namely A Limited and B Limited. Mr. KM is one of
the Key management personnel in PQR Limited. •
(a) Determine the entity to whom exemption from disclosure of related party
transactions is to be given. Also examine the transactions and with whom such
exemption applies.
(b) What are the disclosure requirements for the entity which has availed the
exemption?

QUESTION 2

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 01:44:12)
(Question number in Rtp: 8)
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Mr. X owns 95% of entity A and is its director. He is also beneficiary of a trust
that owns 100% of entity B, of which he is a director.
Whether entities A and B are related parties?
Would the situation be different if:
(a) Mr. X resigned as a director of entity A, but retained his 95% holding?
(b) Mr. X resigned as a director of entities A and B and transferred the 95%
holding in entity A to the trust?

QUESTION 3

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 02:11:44)
(Question number in Rtp: 11)

Entity A owns 30% of the share capital of entity B and has the ability to exercise
significant influence over it.
Entity B holds the following investments:
• 70% of the share capital of its subsidiary, entity C; and
• 30% of the share capital of entity D, with the ability to exercise significant
influence.
Entity A transacts with entities C and D. Should entity A disclose these
transactions as related party transactions in its separate financial statements?
Also explain the disclosure of such transactions in the financial statements of C
and D as related party transaction.
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TOPIC 26
INTANGIBLES
(IND AS 38)
QUESTION 1

(RTP VIDEO NOV. 2020)

(TIMING IN VIDEO: 03:17:00)
(Question number in Rtp: 14)

ABC Pvt. Ltd., recruited a player. As per the terms of the contract, the player is
prohibited from playing for any other entity for coming 5 years and have to in the
employment with the company and cannot leave the entity without mutual
agreement. The price the entity paid to acquire this right is derived from the skills
and fame of the said player. The entity uses and develops the player through
participation in matches. State whether the cost incurred to obtain the right
regarding the player can be recognised as an intangible asset as per Ind AS 38?

QUESTION 2

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 02:48:52)
(Question number in Rtp: 4)

PQR Ltd. is a gaming developer company. Few years back, it developed a new game
called 'Cloud9'. This game sold over 10,00,000 copies around the world and was
extremely profitable. Due to its popularity, PQR Ltd. released a new game in the
‘Cloud9’ series every year. The games continue to be the bestseller. Based on
Management’s expectations, estimates of cash flow projections for the ‘cloud9
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videogame series’ over the next five years have been prepared. Based on these
projections, PQR Ltd. believes that cloud9 series brand should be recognised at
INR 20,00,000 in its financial statement. PQR Ltd. has also paid INR 10,00,000 to
MNC Ltd. to acquire rights of another video game series called the ‘Headspace’
videogame series. The said series have huge demand in the market.
Discuss the accounting treatment of the above in the financial statements
of PQR Ltd.

QUESTION 3

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 02:36:44)
(Question number in Rtp: 18)

D Ltd. a leading publishing house, purchased copyright of a book from its author
for publishing the same. As per the terms of the contract, if D Ltd. chooses to
make the payment upfront then, copyright consideration of ₹ 80,00,000 is to be
paid (which is in line with general practice in such arrangements). However, the
contract also provided that, in case D Ltd. chooses to pay the consideration after
2 years, then it will be required to pay ₹ 1,00,00,000. At what value should the
intangible asset be recognised as per Ind AS 38?

QUESTION 4

(RTP VIDEO NOV. 2022)

(TIMING IN VIDEO: 03:36:21)
(Question number in Rtp: 12)

An entity has an intangible asset in the form of a product protected by patented

technology which is expected to be a source of net cash inflows for at least 15
years. It has been recognised in the books on initial date at ₹ 12,00,000. The
entity has a commitment from a third party to purchase that patent in five years
for 60 per cent of the fair value of the patent at the date it was acquired, and
the entity intends to sell the patent in five years. Company is amortising the asset
in 15 years considering its residual value to be Zero. Annual amortization charged
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to Profit and Loss is ₹ 80,000. State, whether the accounting treatment done by
the Company is in accordance with Ind AS 38? If not, then calculate the annual
amortization of the intangible asset and also the amount at which it will be
reflected in the balance sheet.

TOPIC 27
CONCEPTUAL FRAMEWORK ON FINANCIAL
REPORTING
QUESTION 1

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 00:12:50)
(Question number in Rtp: 1)

Defense Innovators Limited is a public sector undertaking and is engaged in the

construction of warships and submarines. XYZ Private Limited approached Defense
Innovators Limited for construction of "specially designed" ships for it, which will
be used by XYZ Private Limited for transportation of specific goods. The offer was
accepted by the Defense Innovators Limited and both the companies entered into
an agreement for the construction and delivery of 3 specially designed ships on
'Fixed Price' basis with variable component in respect to certain items.
Base and depot (B & D) spares for all three ships shall be procured by Defense
Innovators Limited and will be paid on the cost of the item with certain percentage.
The contract states that "certain equipment" out of variable cost items, will be
supplied by XYZ Private Limited at 'free of cost' for installation on board of ship.
It is, therefore, to be noted as under:
(i) Some equipment are procured by Defense Innovators Limited in the presence
of the XYZ Private Limited's representative for technical scrutiny as well as
negotiating the prices. The vendors of these equipment are paid by Defense
Innovators Limited. The cost of the equipment along with the cost of
installation and profit thereon is claimed and reimbursed by XYZ Private
Limited to Defense Innovators Limited.
(ii) There are certain other equipment for which orders are directly placed and
also paid by the XYZ Private Limited. These equipment are known as 'Buyer
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Furnished Equipment (BFE)' and are delivered to the company 'free of cost'
for installing in the ship. The labour cost of Installation of these are already
included in the price component of the contract. BFEs are returned to the
buyer after completion of the ship.
The period required for construction of one ship was approximately four years.
Whether the cost of Buyer Furnished Equipment's (BFE's) supplied by XYZ
Private Limited to Defense Innovators Limited for-installing the same in the
ships can be considered as 'inventory' by Defense Innovators Limited and
then on delivery of ship will be recognised as revenue in its books of account?
Elaborate.
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TOPIC 28
NCA HELD FOR SALE (IND AS 105)

QUESTION 1

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 02:29:22)
(Question number in Rtp: 13)

On February 28, 20X1, Entity X is committed to the following plans:

(a) To sell a property after completion of certain renovations to increase its value
prior to selling it. The renovations are expected to be completed within a short
span of time i.e., 2 months.
(b) To sell a commercial building to a buyer after the occupant vacates the
building. The time required for vacating the building is usual and customary
for sale of such commercial property. The entity considers the sale to be
highly probable.
Can the above-mentioned property and commercial building be classified as non-
current assets held for sale at the reporting date i.e. 31st March, 20X1?

QUESTION 2

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 01:56:56)
(Question number in Rtp: 10)

X Ltd. acquires B Ltd. exclusively with a view to sale and it meets the criteria to be
classified as discontinued operation as per Ind AS 105. Further, following
information is available about B Ltd.:
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Fair value of total assets excluding liabilities on acquisition – ₹ 360 Costs to sell
as on acquisition and on reporting date – ₹ 10
Fair value of liabilities on acquisition and reporting date – ₹ 80
Fair value of total assets excluding liabilities on the reporting date – ₹ 340
How discontinued operation pertaining to B Ltd. should be measured in consolidated
financial statements of X Ltd. on acquisition date and reporting date?

QUESTION 3

(RTP VIDEO NOV. 2022)

(TIMING IN VIDEO: 03:45:32)
(Question number in Rtp: 14)

Company A has financial year ending 31st March, 20X0. On 1st June, 20X0, the
Company has classified its Division B as held for sale in accordance with Ind AS
105. How property, plant and equipment (PPE) for which the company has adopted
cost model shall be measured immediately before the classification as held for
sale on 1st June, 20X0?
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TOPIC 29
JOINT ARRANGEMENTS(IND AS 111)

QUESTION 1

(RTP VIDEO MAY 2022)

(TIMING IN VIDEO: 03:08:19)
(Question number in Rtp: 12)

Identify the type of joint arrangements in each of the following scenarios:

(i) X Ltd and Y Ltd, manufacturing similar type of mobile phones, form a joint
arrangement to manufacture and sell mobile phones. Under the terms of the
arrangement, both X Ltd and Y Ltd are to use their own assets to manufacture
the mobile phones and both are responsible for liabilities related to their
respective manufacture. The arrangement also lays down the distribution
revenues from the sale of the mobile phones and expenses incurred thereof.
X Ltd however has exclusive control over the marketing and distribution
functions and does not require the consent of Y Ltd in this aspect. No separate
entity is created for the arrangement.
(ii) Continuing with (i) above, what would be the classification of the joint
arrangement if X Ltd and Y Ltd both jointly control all the relevant activities
of the Joint arrangement including the marketing and the distribution
functions?
(iii) What would be the classification of the joint arrangement if under the terms
of the arrangement, a separate entity is created to manufacture the mobile
phones.
(iv) Continuing with (iii) above, the joint arrangement is a means of manufacturing
mobile phones on a common platform but the output of the joint arrangement
is purchased by both X Ltd and Y Ltd in the ratio of 50:50 . The joint
arrangement cannot sell output to third parties. The price of the output sold
to X Ltd and Y Ltd is set by both the parties to the arrangement to cover the
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production costs and other administrative costs of the joint arrangement

entity.
(v) Would your answer in (iv) above be different if X Ltd and Y Ltd sold their
respective share of output to third parties?
(vi) Assume that in (iv) above, the contractual terms of the arrangement
were modified so that the joint arrangement entity is not obliged to sell
the output to X Ltd and Y Ltd but was able to sell the output to third
parties.
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TOPIC 30
AGRICULTURE(IND AS 41)
QUESTION 1

(RTP VIDEO MAY 2021)

(TIMING IN VIDEO: 00:59:53)
(Question number in Rtp: 14)

Analyse whether the following activities fall within the scope of Ind AS 41 with
proper reasoning:
• Managing animal-related recreational activities like Zoo
• Fishing in the ocean
• Fish farming
• Development of living organisms such as cells, bacteria and viruses
• Growing of plants to be used in the production of drugs
• Purchase of 25 dogs for security purpose of the company’s premises.

QUESTION 2

(RTP VIDEO NOV 2022)

(TIMING IN VIDEO: 00:57:18)
(Question number in Rtp: 7)

ABC Ltd. is in the business of manufacturing an apple beverage and requires large
quantity of apples to manufacture such beverage. In order to satisfy its
requirement of apples, it enters into 3 years lease contracts with owners of apple
orchards. The lease contracts are mainly of two types:
(1) Contract 1: The owner of the apple orchard (i.e. the lessor) raises the apple
trees to produce apples. ABC Ltd. (i.e. lessee) makes a fixed annual payment
to the owner of the apple orchard who is required to cultivate the produce as
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per the specifications of ABC Ltd. ABC Ltd. harvests the apples itself for
fulfilling its requirement of apples.
(2) Contract 2: ABC Ltd. obtains the apple orchard from owner (i.e. the lessor)
to raise the apple trees for subsequent harvest of the apples to ensure that
the apples are as per the requirements of ABC Ltd. ABC Ltd. makes a fixed
annual payment to the owner of the apple orchards (i.e. the lessor).
Explain whether ABC Ltd. is engaged in agricultural activity as per Ind AS 41 in
both of the cases?
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TOPIC 31
FAIR VALUE MEASUREMENTS (IND AS 113)
QUESTION 1

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 00:44:56)
(Question number in Rtp: 5)

On 1st January, 20X1, A Ltd assumes a decommissioning liability in a business

combination. The reporting entity is legally required to dismantle and remove an
offshore oil platform at the end of its useful life, which is estimated to be 10 years.
The following information is relevant:
If A Ltd was contractually allowed to transfer its decommissioning liability to a
market participant, it concludes that a market participant would use all of the
following inputs, probability weighted as appropriate, when estimating the price it
would expect to receive:
a. Labour costs
Labour costs are developed based on current marketplace wages, adjusted for
expectations of future wage increases, required to hire contractors to
dismantle and remove offshore oil platforms. A Ltd. assigns probability to a
range of cash flow estimates as follows:
Cash Flow Estimates: 100 Cr 125 Cr 175 Cr

Probability: 25% 50% 25%

b. Allocation of overhead costs:

Assigned at 80% of labour cost
c. The compensation that a market participant would require for undertaking the
activity and for assuming the risk associated with the obligation to dismantle
and remove the asset. Such compensation includes both of the following:
i. Profit on labour and overhead costs:
A profit mark-up of 20% is consistent with the rate that a market
participant would require as compensation for undertaking the activity
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ii. The risk that the actual cash outflows might differ from those expected,
excluding inflation:
A Ltd. estimates the amount of that premium to be 5% of the expected
cash flows. The expected cash flows are ‘real cash flows’ / ‘cash flows in terms
of monetary value today’.
d. Effect of inflation on estimated costs and profits
A Ltd. assumes a rate of inflation of 4 percent over the 10 -year period based
on available market data.
e. Time value of money, represented by the risk-free rate: 5%
f. Non-performance risk relating to the risk that Entity A will not fulfill the
obligation, including A Ltd.’s own credit risk: 3.5%
A Ltd, concludes that its assumptions would be used by market participants. In
addition, A Ltd. does not adjust its fair value measurement for the existence of a
restriction preventing it from transferring the liability.
You are required to calculate the fair value of the asset retirement obligation.

QUESTION 2

(RTP VIDEO NOV. 2021)

(TIMING IN VIDEO: 02:38:58)
(Question number in Rtp: 15)

(i) Entity A owns 250 ordinary shares in company XYZ, an unquoted company.
Company XYZ has a total share capital of 5,000 shares with nominal value of
₹ 10. Entity XYZ’s after-tax maintainable profits are estimated at ₹ 70,000
per year. An appropriate price/earnings ratio determined from published
industry data is 15 (before lack of marketability adjustment). Entity A’s
management estimates that the discount for the lack of marketability of
company XYZ’s shares and restrictions on their transfer is 20%. Entity A
values its holding in company XYZ’s shares based on earnings. Determine the
fair value of Entity A’s investment in XYZ’s shares.
(ii) Based on the facts given in the aforementioned part (i), assume that, Entity A
estimates the fair value of the shares it owns in company XYZ using a net
asset valuation technique. The fair value of company XYZ’s net assets including
those recognised in its balance sheet and those that are not recognised is ₹
8,50,000. Determine the fair value of Entity A’s investment in XYZ’s shares.
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TOPIC 32
INTERIM FINANCIAL REPORTING (IND AS 34)
QUESTION 1

(RTP VIDEO NOV 2022)

(TIMING IN VIDEO: 01:04:59)
(Question number in Rtp: 6)

PQR Ltd. is preparing its interim financial statements for quarter 3 of the year. How the
following transactions and events should be dealt with while preparing its interim
financials:
(i) It makes employer contributions to government-sponsored insurance funds
that are assessed on an annual basis. During Quarter 1 and Quarter 2 larger
amount of payments for this contribution were made, while during the Quarter
3 minor payments were made (since contribution is made upto a certain
maximum level of earnings per employee and hence for higher income
employees, the maximum income reaches before year end).
(ii) The entity intends to incur major repair and renovation expense for the office
building. For this purpose, it has started seeking quotations from vendors. It
also has tentatively identified a vendor and expected costs that will be
incurred for this work.
(iii)The company has a practice of declaring bonus of 10% of its annual
operating profits every year. It has a history of doing so.
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