CA Final May 2023 Suggested Answers Paper 1 Financial Reporting (Old Scheme)

FOR CA FINAL EXAM PREPARATION

CA Final 2023
Suggested Answers ·
Paper 1 Financial
Reporting (Old
Scheme)
EXAM YEAR TYPE

CA Final 2023 Suggested Answers
SUBJECT DATE

Paper 1 Financial Reporting (Old Scheme) May 2023

Notes · Sample Papers · Previous Year Papers · Mock Tests

m
m .co
c. o

e m
em l a s
s a g

PAPER – 1 : FINANCIAL REPORTING
Question No.1 is compulsory. Candidates are required to answer any four questions from

m
c. o
the remaining five questions.

m
c. o Working notes should form part of the answers. m
Wherever necessary, suitable assumptions may be made and disclosed by way of a note.

m s e
s e l a
a ag
Question 1

l
ag
(a) The draft balance sheets of Swan Limited and Duck Limited as at 31st March 2023 is as
under:
Amount ` in lakhs
Particulars Swan Limited Duck Limited
Assets
Non-Current Assets
Property, Plant and Equipment 800 1,000

m
Investments 900 240

. co
Current Assets

em
Inventories 360 260
Financial Assets
l a s
-
-
Trade Receivables
Cash & Cash Equivalentsa g 1,040
520
540
290
Other Current Assets 700 350
Total 4,320 2,680
Swan Limited Duck Limited
Equity and Liabilities
Equity

o m-
Share Capital

m c
. 900
c. o
- Swan Limited: Equity Shares of ` 10 each 1,200
- Duck Limited: Equity Shares of ` 100 each
1,450se
-
m
s em l a
Other Equity 420

la ag
Non-Current Liabilities

ag Financial Liabilities
- Long-Term Borrowings 700 500
Long-Term Provisions 140 200

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 1 of 39

2 FINAL EXAMINATION: MAY 2023

Deferred Tax 80 -
Current Liabilities
Financial Liabilities
- Short-Term Borrowings 250 290
- Trade Payables 500 370
Total 4,320 2,680
On 1st April 2023, Swan Limited acquired 80% equity shares of Duck Limited.
Swan Limited agreed to pay to each shareholder of Duck Limited, ` 20 per equity share
in cash and to issue five equity shares of ` 10 each of Swan Limited in lieu of every six
shares held by the shareholders of Duck Limited. The fair value of the shares of
Swan Limited was ` 100 per share as on the date of acquisition.
Swan Limited also agreed to pay an additional consideration being higher of ` 90 lakhs
and 30% of any excess profits in the first year, after acquisition, over Duck Limited's
profits in the preceding 12 months (financial year 2022-2023) made by Duck Limited.
The additional amount will be due in 3 years post the date of acquisition. Duck Limited
earned ` 30 lakhs profit in the preceding year and expects to earn ` 40 lakhs in financial
year 2023-2024.
The fair value exercise resulted in the following:
i. Fair value of Property, Plant and Equipment and Investments of Duck Limited on
1 st April, 2023 was ` 1,200 lakhs and ` 300 lakhs respectively.
ii. Duck Limited owns a popular brand name that meets the recognition criteria for
Intangible Assets under Ind AS 103 'Business Combinations'. Independent valuers
have attributed a fair value of ` 250 lakhs for the brand. However, the brand does
not have any cost for tax purposes and no tax deductions are available for the same.
iii. Following is the statement of contingent liabilities of Duck Limited as on
1 st April, 2023:
Particulars Fair Value Remarks
( ` in lakhs)
Lawsuit filed by a 5 It is not probable that an outflow of
customer for a claim of resources embodying economic
` 20 lakhs benefits will be required to settle the
claim. Any amount which would be
paid in respect of lawsuit will be tax
deductible.
Income tax demand of 20 It is not probable that an outflow of
` 70 lakhs raised by tax resources embodying economic
authorities. Duck Limited

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 2 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 3

has challenged the benefits will be required to settle the
demand in the High claim.

m
Court

m c. o
co
iv. Duck Limited had certain equity settled share-based payment awards (original

. em
s
award) which were replaced by the new awards issued by Swan Limited. As per

em
the terms of original awards, the vesting period was 5 years and as of the acquisition
l a
l a s date the employees of Duck Limited had already served 2 years of service. As per
ag
ag
the new awards, the vesting period has been reduced to 1 year (1 year from the
acquisition date). The fair value of the award on acquisition date was as follows:
Original Awards: ` 12 lakhs
New Awards: ` 18 lakhs.
v. Further, Swan Limited has also agreed to pay one of the founder shareholder of
Duck Limited a sum of ` 15 lakhs provided he stays with the Company for two years
after the acquisition.

m
c. o
vi. The acquisition cost of Swan Limited for Duck Limited was ` 26 lakhs.

em
vii. The applicable tax rate for both the companies is 30%.

s
aotherwise, all items have a fair value and tax base
viii. Assume 10% per annum discount rate.

g l
a at the acquisition date.
ix. Also, assume, unless stated
equal to their carrying amounts
You are required to prepare opening Consolidated Balance Sheet of Swan Limited as on
1 st April 2023. Working Notes should form part of your answer. (15 Marks)
(b) X Limited has a loan facility from a bank which is to be repaid within a period of six
months from the end of the reporting period. Before the end of the reporting period,
X Limited and the bank enters into an arrangement as per which the existing outstanding
loan will unconditionally roll into the new facility which will expire after a period of

m
c. o
3 years.

m
c. o m
i. How should the loan be classified in the balance sheet of X Limited as at the

s e
em
reporting date? Give reasons.
ii. Will the answer be different if the new facility is agreed uponaafter the end of the
s l
gla reporting period? Why? What will be the answer?
ag
a iii. Will the answer to (i) be different if the new facility is not yet tied up with the existing
bank, but X Limited has the potential to refinance the obligation. Give reasons.
(5 Marks)

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 3 of 39

4 FINAL EXAMINATION: MAY 2023

Answer
(a) Consolidated Balance Sheet of Swan Ltd as on 1 st April, 2023
Notes No. ` in lakhs
Assets
Non-current assets
Property, plant and equipment 9 2,000.00
Intangible assets 10 250.00
Financial assets
Investment 11 1,200.00
Current assets
Inventories 12 620.00
Financial assets:
Trade receivables 13 1,580.00
Cash and cash equivalents 14 640.00
Other current assets 15 1,050.00
Total 7,340.00
Equity and Liabilities
Equity
Share capital - Equity shares of ` 10 each 1 1,260.00
Other equity 2 2,475.18
Non-controlling interest (W.N.4) 330.70
Non-current liabilities
Financial liabilities
Long-term borrowings 3 1,200.00
Long-term provisions 4 407.62
Deferred tax liability 5 231.50
Current Liabilities
Financial liabilities
Short-term borrowings 6 540.00
Trade payables 7 870.00
Short-term provision 8 25.00
Total 7,340.00

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 4 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 5

Notes to Accounts (All figures are ` in lakhs)
1. Equity Share capital

m
m c. o
Equity shares of ` 10 each as per the balance sheet before 1,200

c o
. allotted to Duck Ltd. (7,50,000 x 80% x ` 10)
acquisition of Duck Ltd.
em
m a s
2. seOther Equity l
Shares 60 1,260

g la As per the balance sheet before acquisition of Duck Ltd. 1,450 ag
a
Less: Acquisition cost (26) 1,424
Replacement award 4.80
Security Premium (7,50,000 shares x 80% x ` 90) 540
Capital Reserve (W.N.5) 506.38 2,475.18
3. Long-term borrowings

m
c. o
As per the balance sheet before acquisition of Duck Ltd. 700

em
Duck Ltd. 500 1,200
4. Long-term provisions
l a s
As per the balance sheetgbefore acquisition of Duck Ltd.
Deferred consideration
a 67.62
140

Duck Ltd. 200 407.62
5. Deferred tax liability
As per the balance sheet before acquisition of Duck Ltd. 80
Deferred tax impact due to acquisition of Duck Ltd. (W.N.2) 151.50 231.50

o m
6. Short term borrowings

m c
. 540
c. o m
As per the balance sheet before acquisition of Duck Ltd. 250

em se
Duck Ltd. 290

s g la
la As per the balance sheet before acquisition of Duck Ltd.a
7. Trade payables

ag Duck Ltd.
500
370 870

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 5 of 39

6 FINAL EXAMINATION: MAY 2023

8. Short-term provisions

Lawsuit damages 5
Income-tax demand 20 25
9. Property, plant and equipment

As per the balance sheet before acquisition of Duck Ltd. 800
Duck Ltd. 1,200 2000
10. Intangible assets

Brand of Duck Ltd. acquired 250
11. Investment

As per the balance sheet before acquisition of Duck Ltd. 900
Duck Ltd. 300 1,200
12. Inventories

As per the balance sheet before acquisition of Duck Ltd. 360
Duck Ltd. 260 620

13. Trade receivables

As per the balance sheet before acquisition of Duck Ltd. 1,040
Duck Ltd. 540 1,580
14. Cash and cash equivalents

As per the balance sheet before acquisition of Duck Ltd. 520
Less: Acquisition cost paid (26)
Less: Paid to Duck Ltd. (144) 350
Duck Ltd. 290 640

15. Other current assets

As per the balance sheet before acquisition of Duck Ltd. 700
Duck Ltd. 350 1,050

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 6 of 39

m
m .co
c. o

em
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 7

Working Notes:
1. Computation of Purchase Consideration

m
m c. o
Particulars No. of ` in lakhs

co m
shares

m . s e
a
Share capital of Duck Ltd. 900

s e Number of shares l
la Shares to be issued (5 shares against 6 shares of Duck 7,50,000 ag
9,00,000

ag Ltd.)
Fair value of Swan Ltd.’s share is ` 100 per share
Purchase consideration
Shares issued (7,50,000x 80% x ` 100 per share) (A) 600
Cash payment (` 20 x 9,00,000 x 80%) (B) 144
Deferred consideration (discounting ` 90 lakhs for 3 67.62
years @10%) (C)
m
. co
Replacement award [Market based measure of the

em
acquiree award (12) x ratio of the portion of the vesting

s
period completed (2) / greater of the total vesting period

l a
(3) or the original vesting period (5) of the acquiree

g
a
award (ie 12 x 2/5)] (D) 4.80
Purchase consideration for 70% shares (A + B + C + D) 816.42

2. Computation of deferred tax impact due to change in fair value of asset and
liabilities acquired
Particulars Book Fair FV
value value adjustment
(A) (B) (A-B)

m250
Property, plant and equipment 1,000 1,200 200

m
Intangible assets (Brand) -
c o
. 60
250

c. o 1,750em
Investment 240 300

em s
gla
510

las Less: Contingent liability acquired
a
ag
Provision for lawsuit damages (5)
Net difference in fair value 505
Deferred tax liability @ 30% 151.5

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 7 of 39

8 FINAL EXAMINATION: MAY 2023

3. Computation of fair value of net identifiable assets acquired f rom Duck Ltd.
Particulars Book value
Total assets as per the balance sheet 2,680
Add: Fair value adjustment in PPE and Investment (200+60) 260
Add: Intangible assets (Brand) 250
Fair value of total identifiable assets 3,190
Less: Total liabilities as per the balance sheet (1,360)
(500+200+290+370)
Less: Contingent liability acquired
Lawsuit damages 5
Income tax demand 20 (25)
Less: Defer tax liability (W.N.2) (151.50)
Fair value of net identifiable assets (100%) 1,653.50
4. Computation of non-controlling interest in Duck Ltd. (Proportionate share
basis)
Non-controlling interest (1,653.50 x 20%) = 330.70
5. Computation of capital reserve on acquisition of Duck Ltd.
Particulars Book value
Fair value of net identifiable assets 1,653.50
Less: Purchase consideration (816.42)
Less: NCI (W.N.4) (330.70)
Capital reserve 506.38
Notes:
(a) The value of replacement award is allocated between consideration transferred and
post combination expense. The portion attributable to purchase consideration is
determined based on the fair value of the replacement award for the service
rendered till the date of the acquisition. Accordingly, ` 4.8 lakh (12 x 2/5) is
considered as a part of purchase consideration and is credited to Swan Ltd.’s equity
as this will be settled in its own equity. Since the fair value of the award on the
acquisition date is ` 18 lakh the balance of (18 - 4.8) ` 13.2 lakh will be recorded
as employee expense in the books of Duck Ltd. over the remaining life, which is
1 year in this scenario.
(b) With respect to deferred consideration, ` 90 lakh is the minimum payment to be
paid after 3 years. The other element is if company meet certain target then they

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 8 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 9

will get 30% of that or ` 90 lakh whichever is higher. In the given case, since the
minimum what is expected to be paid the fair value of the contingent consideration

m
has been considered as zero. The impact of time value on deferred consideration

m c. o
has been given @ 10%.

.co em
(c) The additional consideration of ` 15 lakhs to be paid to the founder shareholder is

m
e
contingent to him/her continuing in employment and hence this will be co nsidered

l a s
a s g
as employee compensation and will be recorded as post combination expenses in

l a
a(b)g (i) The
the statement of profit and loss of Duck Ltd.
loan is not due for payment at the end of the reporting period. The entity and
the bank have agreed for the said roll over before the end of the reporting period
for a period of 3 years. Since the entity has an unconditional right to defer the
settlement of the liability for at least twelve months after the reporting period, the
loan should be classified as non-current.
(ii) Yes, the answer will be different if the arrangement for roll over is agreed upon after
the end of the reporting period, since assessment is required to be made based on
terms of the existing loan facility. As at the end of the reporting peri od, the entity

m
does not have an unconditional right to defer settlement of the liability for at least

c o
. loan should be classif ied as current. This
twelve months after the reporting period, the loan is to be classified as current.

is because, as per paragraph 73eofm
(iii) Yes, the answer will be different, and the

lasnotof consider
Ind AS 1, when refinancing or rolling over the

for refinancing), the entitygdoes
obligation is not at the discretion the entity (for example, there is no arrangement

a
and classifies the obligation as current.
the potential to refinance the obligation

Question 2
(a) Venus Limited had purchased on 1st April, 2020, a PPE kits manufacturing plant for
` 12.00 lakhs. The useful life of the plant is 8 years. The deprecation is provided on
straight line method. On 30 th September, 2022, Venus Limited temporarily discontinues
production at the said plant due to decline in the demand for PPE kits. However, the
plant is maintained in a workable condition, and it can be used in future whenever the

m
co
demand picks up.

m .
c. o
The accountant of Venus Limited decided to treat the plant as held for sale under

m
se
Ind AS 105 until the demand picks up. She, thus measures the plant at lower of carrying

em la
amount and fair value less cost to sell.

las a g
She also stopped charging the depreciation for the rest of period as the plant was held

ag
for sale. The fair value less cost to sell the said plant on 30th September, 2022 and
31st March, 2023 was ` 6.75 lakhs and ` 6.00 lakhs respectively.
She performed the following working to determine the carrying amount of the plant on
initial classification as held for sale:

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 9 of 39

10 FINAL EXAMINATION: MAY 2023

Particulars ` in lakhs
Purchase price of the plant 12.00
Less: Accumulated depreciation for 2.5 years
( ` 12.00 lakhs / 8 years x 2.5 years) (3.75)
8.25
Fair value less cost to sales as on 30 th September, 2022 6.75
The carrying amount is lower of ` 8.25 lakhs and ` 6.75 lakhs 6.75
Balance Sheet extracts as at 31 st March, 2023
Particulars ` in lakhs
Assets
Current Assets
Other Current Assets
Assets classified as held for sale 6.00
Discuss whether the above accounting treatment made by the accountant is as per
applicable Ind AS. If not, what should be the correct treatment. Provide balance sheet
extract as at 31st March, 2023 together with the computation of the carrying value of PPE
as at 31st March, 2023. (8 Marks)
(b) On 1st April, 2021, Z Limited enters into a contract to construct a manufacturing facility
for Mint Limited at a fixed consideration of ` 30.00 lakhs. Z Limited can earn an incentive
of ` 3.75 lakhs if the construction is completed within 24 months. Z Limited expects the
costs to be ` 16.50 lakhs. At the inception of the contract, Z Limited determines that the
contract contains single performance obligation satisfied over time. Z Limited also
concludes that it is highly probable that a significant reversal in the amount of cumulative
revenue recognized will occur as the completion of the manufacturing facility is highly
susceptible to factors outside of the Company's influence, due to exceptionally high
rainfall in the region.
At 31 st March, 2022, Z Limited has satisfied 65% of its performance obligation on the
basis of costs incurred to date and concludes that the variable consideration is still
constrained due to uncertain weather conditions.
However, on 15 th April, 2022, the contract is modified. The fixed consideration is
enhanced by ` 2.25 lakhs and the expected costs increases by ` 1.20 lakhs. The
contract period is also extended by 6 months. Z Limited now concludes that it is highly
probable that the incentive award will be achieved. The contract remains a single
performance obligation.

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 10 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 11

Compute, as per applicable Ind AS: (i) For financial year 2022-2023 , revenue from the
contract, contract costs & resultant profit, (ii) Additional revenue (catch up adjustment)

m
as on the date of modification of the contract i.e. 15 th April, 2022. (6 Marks)

m c. o
co
(c) On 1 st January, 2023, Z Limited enters into an agreement with a college for renovation

.
of building including installation of new air conditioners at a transaction price of
em
e m
` 40.00 lakhs. The expected cost of air conditioners is ` 12.00 lakhs. The other
l a s
a s g
expected cost is ` 20.00 lakhs. Z Limited purchases the air conditioners and they are

l a
ag Z Limited has incurred actual other costs (excluding the air conditioners) of ` 4.00 lakhs
delivered to the site before 31 st March, 2023. Z Limited uses an input method based on
cost to measure progress towards completion of the contract.

by 31 st March, 2023.
Determine the revenue to be recognized as per applicable Ind AS for the year ended
31st March, 2023, if performance obligation is met over a period of time. (6 Marks)
Answer
(a) The treatment of PPE kits manufacturing plant needs to be examined in the light of the

m
provisions given in Ind AS 16 ‘Property, Plant and Equipment’ and Ind AS 105 ‘Non-

c o
m. a non-current asset as held for sale if its
current Assets Held for Sale and Discontinued Operations’.

Operations’ states that an entity shalleclassify
Paragraph 6 of Ind AS 105 ‘Non-current Assets Held for Sale and Discontinued

carrying amount will be recovered sprincipally through a sale transaction rather than
g la
through continuing use.
a
Paragraph 7 of Ind AS 105 states that for this to be the case, the asset must be available
for immediate sale in its present condition subject only to terms that are usual and
customary for sale of such assets (or disposal groups) and its sale must be highly
probable. Thus, an asset cannot be classified as a non-current asset held for sale, if the
entity intends to sell it in the distant future.
Further, paragraph 8 of Ind AS 105 states that for the sale to be highly probable, the
appropriate level of management must be committed to a plan to sell the asset (or

m
co
disposal group), and an active programme to locate a buyer and complete the plan must

m .
have been initiated. Further, the asset (or disposal group) must be actively marketed for

c. o se
m
sale at a price that is reasonable in relation to its current fair value. In addition, the sale

em
should be expected to qualify for recognition as a completed sale within one year from

s g la
the date of classification and actions required to complete the plan should indicate that

la a
it is unlikely that significant changes to the plan will be made or that the plan will be

ag withdrawn.


PS: Read financial year ‘2022-2023’ as ‘2021-2022’.

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 11 of 39

12 FINAL EXAMINATION: MAY 2023

Paragraph 13 of Ind AS 105 states that an entity shall not classify as held for sale a non-
current asset (or disposal group) that is to be abandoned. This is because its carrying
amount will be recovered principally through continuing use.
Paragraph 14 of Ind AS 105 states that an entity shall not account for a non-current asset
that has been temporarily taken out of use as if it had been abandoned.
Paragraph 55 of Ind AS 16 states that depreciation does not cease when the asset
becomes idle or is retired from active use unless the asset is fully depreciated.
Going by the guidance given above, the Accountant of Venus Ltd. has treated the plant
as held for sale and measured it at the fair value less cost to sell. Also, the depreciation
has not been charged thereon since the date of classification as held for sale which is
not correct and not in accordance with Ind AS 105 and Ind AS 16.
Accordingly, the manufacturing plant should neither be treated as abandoned asset nor
as held for sale because its carrying amount will be principally recovered throu gh
continuous use. Venus Ltd. shall not stop charging depreciation or treat the plant as
held for sale because its carrying amount will be recovered principally through continuing
use to the end of their economic life.
The working of the same for presenting in the balance sheet is given as below:
Calculation of carrying amount as on 31 st March, 2023 `
Purchase Price of Plant 12,00,000
Less: Accumulated depreciation (12,00,000/ 8 years) x 3 years (4,50,000)
7,50,000
Less: Impairment loss (1,50,000)
6,00,000

Balance Sheet extracts as on 31 st March, 2023
Assets `
Non-Current Assets
Property, Plant and Equipment 6,00,000
Working Note:
Fair value less cost to sell of the Plant = ` 6,00,000
Value in use (not given) or Nil (since plant has temporarily not been used for
manufacturing due to decline in demand)
Recoverable amount = higher of above i.e. ` 6,00,000
Impairment loss = Carrying amount – Recoverable amount
Impairment loss = ` 7,50,000 - ` 6,00,000 = ` 1,50,000.

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 12 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 13

(b) Year 1 i.e. financial year 2021-2022
In the given case, at contract inception, Z Ltd. will exclude the performance bonus of

m
c. o
` 3,75,000 from the transaction price because it is concluded that there is high probability

m
co
that a significant reversal in the amount of cumulative revenue recognised will occur as

. em
s
the completion of the manufacturing facility is highly susceptible to factors outside the

e m
entity’s influence i.e. exceptionally high rainfall in the region.
l a
l a s ag
ag
Therefore, at the inception of the contract, for Z Ltd:

`
Transaction Price 30,00,000
Expected costs (16,50,000)
Expected profit (45%) 13,50,000
As at the year end, 31 st March, 2022, Z Ltd. reassessed the variable consideration (i.e.
performance bonus) and has concluded that the amount is still uncertain in accordance

m
with paragraphs 56–58 of Ind AS 115. Therefore, the cumulative revenue and costs

co
recognised for the year ended March, 2022 will be as follows:

m.
Revenue from the contract (65%) e
`

la s 19,50,000
Contract costs
Resultant profit a g (10,72,500)
8,77,500

Year 2 i.e. financial year 2022-2023
On 15 th April, 2022, Z Ltd. and Mint Ltd. agreed to modified the contract. As a result, the
fixed consideration and expected costs increased by ` 2,25,000 and ` 1,20,000
respectively.
At the date of the modification, since Z Ltd. concluded that it is highly prob able that
m
co
incentive amount will be achieved, it has to include incentive amount of ` 3,75,000 in the

m .
c. o m
transaction price. Therefore, the total potential consideration after the modification is

se
` 36,00,000 (` 32,25,000 fixed consideration + ` 3,75,000 performance bonus) and total

s em la
estimated cost is ` 17,70,000 (` 16,50,000 + ` 1,20,000).

la a g
g
Further, since the modified contract remains a single performance obligation, Z Ltd. will

a account for the contract modification, as if it were part of the ori ginal contract in
accordance with paragraph 21(b) of Ind AS 115.

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 13 of 39

14 FINAL EXAMINATION: MAY 2023

Z Ltd. will update its measure of progress and estimates at the date of the modification
as a cumulative catch-up adjustment as follows:
Calculation of cumulative catch-up adjustment: `
Total potential consideration after the modification A 36,00,000
Actual costs incurred B 10,72,500
Total expected costs to complete C 17,70,000
Percent completion of performance obligation D = B/C 60.6%
(rounded off)
Revenue recognised till date E 19,50,000
Additional revenue to recognised F = (A x D) - E 2,31,600
(c) Costs to be incurred comprise two major components – air conditioners and cost of
construction service.
(a) The air conditioners are part of the overall construction project and are not a distinct
performance obligation.
(b) The cost of air conditioners is substantial to the overall project and are incurred well
in advance.
(c) Upon delivery at site, customer acquires control of such air conditioners.
(d) And there is no modification done to the air conditioners, which the company only
procures and delivers at site. Nevertheless, as part of materials used in overall
construction project, the company is a principal in the transaction with the customer
for such air conditioners also.
Therefore, applying the guidance on Input method –
- The measure of progress should be made based on the percentage of costs
incurred relative to the total budgeted costs.
- The cost of air conditioners should be excluded when measuring such progress and
revenue for such air conditioners should be recognized to the extent of costs
incurred.
The revenue to be recognized is measured as follows:
Particulars Amount (`)
Transaction price 40,00,000
Costs incurred:
(a) Cost of air conditioners 12,00,000
(b) Other costs 4,00,000
Measure of progress: 4,00,000 / 20,00,000 = 20%

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 14 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 15

Revenue to be recognised:
(a) For costs incurred (other than air Total attributable revenue = 28,00,000

m
c. o
conditioners) % of work completed = 20%

o m Revenue to be recognised = 5,60,000

Totalm
. c
(b) Revenue for air conditioners 12,00,000 (equal to costs incurred)
s em
s e revenue to be recognised 12,00,000 + 5,60,000 = 17,60,000
g l a
g a
lTherefore, for the year ended 31 March, 2023, the Company shall recognize revenuea
aQuestion 3
st

of ` 17,60,000 on the project.

(a) ABC Ltd. is into dairy farm. Cows are milked on a daily basis. After milking, milk is
immediately kept in cold storage. The milk is sold to retail distributors on a weekly basis.
On 1st April, 2022, ABC Ltd. had 500 cows which were all 3 years old.
During the financial year 2022-2023, some of the cows became sick and on
30th September, 2022, 20 cows died. On 1st October, 2022, ABC Ltd. purchased 20

o m
replacement cows from the market for ` 63,000 each. These 20 cows were all

c
On 31 March, 2023, ABC Ltd. had 1,000.litres of milk in cold storage which had not
1-year-old when they were purchased.

been sold to retail distributors. The e m price of milk as at 31 March, 2023 was
s
st

` 60 per litre. While selling the a
l milk to distributors, ABC Ltd. incurs selling costs of
market st

` 3 per litre. These amounts g
to change during April, 2023.a
did not change during March, 2023 and are not expected

Information relating to fair value and costs to sell is given below:

Date Fair value of a dairy cow aged Cost to sell
1 year 1.5 year 3 years 4 years a cow

1.4.2022 60,000 66,000 81,000 75,000 3,000

m
1.10.2022 63,000 69,000 84,000 78,000 3,000

m c. o3,300
c. o
31.3.2023 64,500 70,500 87,000 79,500

em
em s
You can assume that fair value of 3.5 year old cow as on 30 September, 2022 is
a
th

s l
g to cows for above
` 81,000.

gla events & transactions in the financial statements of ABC Ltd. a
Provide necessary journal entries in the books of account with respect

a (i) 30th September, 2022;
as at-

(ii) 1 st October, 2022 and

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 15 of 39

16 FINAL EXAMINATION: MAY 2023

(iii) 31st March, 2023.
Also determine the value of milk inventory as at 31st March, 2023. (8 Marks)
(b) On 1st May, 2022, Sanskar Limited purchased ` 42,00,000 worth of land for construction
of a new warehouse for stocking new products.
The land purchased had an old temporary structure which was to be demolished for the
purpose of construction of warehouse. The salvaged material from the demolition was
to be sold as scrap. The company started the construction work of the warehouse on
1 st June, 2022. Following costs were incurred by the company with regard to purchase
of land and construction of warehouse:
Particulars Amount (` )
Legal fees for purchase contract of land and recording ownership 1,50,000
Architect and consultant's fee 2,70,000
Cost of demolishing existing structure on the purchased land 1,35,000
Site preparation charges for the warehouse 1,00,000
Purchase of cement and other materials for the construction 15,00,000
(including GST of ` 1,00,000 and GST credit is 50% of the payment)
Employment costs of the construction workers 8,00,000
General overhead costs allocated to the construction work 30,000
per month
Overhead costs incurred directly on the construction of warehouse 35,000
per month
Income received from land used as temporary parking during 80,000
construction phase
Additional Information:
• Receipt of ` 35,000 being proceeds from sale of salvaged and scrapped materials
from demolition of existing structure.
• Materials costing ` 40,000 was wasted and further ` 1,20,000 was spent to rectify
the wrong design work.
• The employment costs are for 10 months i.e. from 1st June 2022 till 31st March, 2023.
• The construction of factory was completed on 28 th February, 2023 (which is
considered as substantial period of time as per Ind AS 23)
• The use of warehouse commenced on 1 st March, 2023.
• The overall useful life of factory building was estimated at 25 years from the date
of completion; however, it is estimated that the roof of the warehouse will need to

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 16 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 17

be replaced 15 years after the date of completion and that the cost of replacing the
roof at current prices would be 25% of the total cost of the building.

m
c. o
• At the end of the 25-year period, Sanskar Limited is legally bound to demolish the

m
co
factory and restore the site to its original condition. The directors of the company

.
estimate that the cost of demolition in 25 years' time (based on prices prevailing at
em
e m
that time) will be ` 80,00,000. An annual risk adjusted discount rate which is
l a s
a s g
appropriate to this project is 10% per annum. The present value of ` 1 payable in

l a
ag • Sanskar
25 years' time at an annual discount rate of 10% per annum is ` 0.092.
Limited raised a loan of ` 60 lakhs @ 10% per annum rate of interest on
1 June, 2022. The building of warehouse meets the definition of a qualifying asset
st

in accordance with Ind AS 23 Borrowing Costs. Sanskar Limited received an
investment income of ` 25,000 on the temporary investment of the proceeds.
• Assume that cost of demolition of old structure is directly attributable to the cost of
land.
• The company follows straight line method of depreciation.

o m
You are required to compute:
i. Cost of construction of the warehouse
c
. 31 March, 2023
e m
iii. Carrying value of warehouse s
ii. Depreciation charge for the year ended st

gl a to be taken to Balance Sheet of the Company on
31 March, 2023.
a
st

You should explain your treatment of all the amounts referred to in this question as part
of your answer. (8 Marks)
(c) Mr. M has an investment in X Limited and Y Limited
(i) Under what circumstances, Mr. M is a related party of X Limited and Y Limited?
(ii) Will X Limited and Y Limited be related parties, if Mr. M has only significant
influence over both X Limited and Y Limited? (4 Marks)

m
c. o
Answer

m
c. o m Cr.
(a) Journal Entries (All figures in `)

em
S. Date Particulars

la seDr.
s g
No.

gla (i) 30 th September, Loss (on death of 20 cows) (Refer Dr.
a 15,60,000

a
2022 W.N.)
To Biological asset 15,60,000
(Loss booked on death of 20 cows)

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 17 of 39

18 FINAL EXAMINATION: MAY 2023

(ii) 1 st October, Biological Asset (purchase of 20 new Dr. 12,00,000
2022 cows) (Refer W.N.)
Loss on initial recognition (of 20 new Dr. 60,000
cows)
To Bank 12,60,000
(Initial recognition of 20 new
purchased cows at fair value less
costs to sell)

(iii) 31 st March, 2023 Loss on remeasurement of old cows Dr. 8,64,000
To Biological asset 8,64,000
[(3,90,00,000 – 15,60,000) –
3,65,76,000]
(Subsequent measurement of cows at
fair value less costs to sell)

Biological Asset Dr. 1,44,000
(13,44,000 – 12,00,000)
To Gain on remeasurement of 1,44,000
new cows
(Subsequent measurement of cows at
fair value less costs to sell)

Inventory (Milk) as at 31 st March, 2023 = ` 57,000 [1,000 x (60 – 3)]
Working Note:
Calculation of Biological asset at various dates
Date Number Age Fair Value Cost to Net (`) Biological
(`) Sell (`) asset (`)
1 st April, 2022 500 3 years 81,000 3,000 78,000 3,90,00,000
30 th September, 2022 (20) 3.5 years 81,000 3,000 78,000 (15,60,000)
1 st October, 2022 20 1 year 63,000 3,000 60,000 12,00,000
3,86,40,000
31 st March, 2023 480 4 years 79,500 3,300 76,200 3,65,76,000
20 1.5 years 70,500 3,300 67,200 13,44,000
3,79,20,000

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 18 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 19

(b) (i) Computation of the cost of construction of the warehouse

m
Description Included in Explanation

c. o
P.P.E. `

m
.co em
Purchase of land 42,00,000 Separately capitalised as cost of land

m a s
and do not form part of cost of

s e Legal fee for purchase l
ag
construction of warehouse

g a
l of contract of land 1,50,000 Associated legal costs are direct costs

a for purchasing the land. Hence,
separately capitalised as cost of land
and do not form part of cost of
construction of warehouse
Net cost of 1,00,000 Given in the question to assume it as
demolishing the directly attributable to the cost of land.
existing structure However, it will be adjusted with the
proceeds from sale of salvaged material

m
co
from demolition (1,35,000 – 35,000).

. Further, it will be separately capitalised

s em
as cost of land and do not form part of

l a
cost of construction of warehouse.
Total cost of land
Architect a
and
g 44,50,000
2,70,000 A direct cost of constructing the
consultant’s fee warehouse
Site preparation 1,00,000 A direct cost of constructing the
charges warehouse
Cement and other 14,10,000* A direct cost of constructing the
materials warehouse net GST credit and wastage

m
(15,00,000 – 50,000 – 40,000)

m c. o
Expense to rectify the Nil Assumed to be abnormal cost

c. o em the
wrong design work

em
Employment costs of
l a s
7,20,000 A direct cost of constructing

las the construction
ag [(8,00,000/10) x 9]
warehouse for a nine-month period till

g
workers 28 February, 2023
th

a Direct overhead costs 3,15,000 A direct cost of constructing the
warehouse for a nine-month period
(35,000 x 9)

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 19 of 39

20 FINAL EXAMINATION: MAY 2023

Allocated overhead Nil Not a direct cost of construction
costs
Income from Nil Not essential to the construction so
temporary use of land recognised directly in profit or loss
as car parking area
Finance costs 4,50,000 Capitalise the interest cost incurred in a
nine-month period (from 1 st June, 2022
to 28 th February, 2023)
Investment income on (25,000) Offset against the interest amount
temporary investment capitalised
of the loan proceeds
Demolition cost Recognised as part of the initial cost at
recognised as a present value (i.e 80,00,000 x 0.092)
provision 7,36,000
Total cost of
construction of a
warehouse 39,76,000
(ii) Computation of depreciation charges for the year ended 31 st March, 2023
Note: Land is not depreciated as per Ind AS 16. Hence, only cost of warehouse is
subject to depreciation.
Total depreciable amount as on
1 st March, 2023 39,76,000
Depreciation for 1 month must
be in two parts:
(a) Depreciation on roof
component 5,522 39,76,000 x 25% x 1/15 x 1/12
(b) Depreciation of remaining
item 9,940 39,76,000 x 75% x 1/25 x 1/12
Total depreciation for the year
2022-2023 15,462
(iii) Computation of carrying value of the warehouse on 31 st March, 2023 `
Cost of the warehouse as on 1 st March, 2023 [computed in (i) 39,76,000
above]
Less: Depreciation for 1 month as computed in (ii) above (15,462)
Carrying value of the warehouse as on 31 st March, 2023 39,60,538

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 20 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 21

*Note: In the above solution, it has been assumed that amount spent for rectifying the
faulty design is not included in the cement and other material cost. However,

m
c. o
alternatively, it may be considered as part of gross cement and material cost and in

o m
such a case, the cost of material will further be reduced with the amount of rectifying the

.c
faulty design as follows:
e m
m
eDescription l a s
s
(i) Computation of the cost of construction of the warehouse

la a g
g
Included in Explanation

a Purchase of land
P.P.E. `
42,00,000 Separately capitalised as cost of land and
do not form part of cost of construction of
warehouse
Legal fee for 1,50,000 Associated legal costs are direct costs for
purchase of contract purchasing the land. Hence, separately
of land capitalised as cost of land and do not form
part of cost of construction of warehouse

m
co
Net cost of 1,00,000 Given in the question to assume it as

.
demolishing the directly attributable to the cost of land.

em
existing structure However, it will be adjusted with the

s
proceeds from sale of salvaged material

g l a from demolition (1,35,000 – 35,000).

a
Further, it will be separately capitalised as
cost of land and do not form part of cost of
construction of warehouse.
Total cost of land 44,50,000
Architect and 2,70,000 A direct cost of constructing the warehouse
consultant’s fee
Site preparation 1,00,000 A direct cost of constructing the warehouse
charges

m
c. o
Cement and other 12,90,000* A direct cost of constructing the warehouse

m
materials net GST credit, wastage and rectification

c. o ethemwarehouse
cost (15,00,000 – 50,000 – 40,000 –

em s
1,20,000)

s
Employment costs
g la period till 2
7,20,000 A direct cost of constructing

gla 8 February, 2023a[(8,00,000/10) x 9]
of the construction for a nine-month

a
workers th

Direct overhead 3,15,000 A direct cost of constructing the warehouse
costs for a nine-month period (35,000 x 9)

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 21 of 39

22 FINAL EXAMINATION: MAY 2023

Allocated overhead Nil Not a direct cost of construction
costs
Income from Nil Not essential to the construction so
temporary use of recognised directly in profit or loss
land as car parking
area
Finance costs 4,50,000 Capitalise the interest cost incurred in a
nine-month period (from 1 st June, 2022 to
28th February, 2023)
Investment income Offset against the interest amount
on temporary capitalised
investment of the
loan proceeds (25,000)
Demolition cost Recognised as part of the initial cost at
recognised as a present value (i.e 80,00,000 x 0.092)
provision 7,36,000
Total cost of
construction of a
warehouse 38,56,000
(ii) Computation of depreciation charges for the year ended 31 st March, 2023
Note: Land is not depreciated as per Ind AS 16. Hence, only cost of warehouse is
subject to depreciation.
Total depreciable amount as on
1 st March, 2023 38,56,000
Depreciation for 1 month must be
in two parts:
(a) Depreciation on roof
component 5,356 38,56,000 x 25% x 1/15 x 1/12
(b) Depreciation of remaining
item 9,640 38,56,000 x 75% x 1/25 x 1/12
Total depreciation for the year
2022-2023 14,996
(iii) Computation of carrying value of the warehouse on 31 st March, 2023 `
Cost of the warehouse as on 1 st March, 2023 [computed in (i) above] 38,56,000
Less: Depreciation for 1 month as computed in (ii) above (14,996)
Carrying value of the warehouse as on 31 st March, 2023 38,41,004

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 22 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 23

(c) (i) As per para 9(a) of Ind AS 24, Mr. M will be considered as a related party to X
Limited, when

m
c. o
1. Mr. M has control or joint control over X Limited

m
co m
2. Mr. M has significant influence over X Limited

m .
Similar will be the circumstances for Mr. M being considered as related party to
s e
s e l a
ag
Y Limited.

l a
ag
(ii) Even if Mr. X has only significant influence over both the entities i.e., X Limited &
Y Limited, then both the entities (X Limited & Y Limited) will not be considered as
related party, if no direct or indirect control is exercised on each other in any of the
manner.
Question 4
(a) Autumn Limited has a policy of providing subsidized loans to its employees for their
personal purposes. Mrs. Jama Bai, a senior HR manager in the Company, took a loan
of ` 12.00 lakhs on the following terms:
•
m
Interest rate 4% per annum

c o
• The principal amount of the loan shall.be recovered in 4 equal annual installments
• Loan disbursement date: 1st April, 2019

s em
a on reducing balance at simple interest is
• The accumulated interest lcomputed
commencing from 31 March, 2020st

g
a installments after collection of the principal amount
collected in 3 equal annual
• Mrs. Jama Bai must remain in service till the principal and interest are paid
• The market rate of a comparable loan to Mrs. Jama Bai is 9% per annum
• The present value of ` 1 at 9% per annum at the end of respective years is as
follows:
Year ending 2020 2021 2022 2023 2024 2025 2026

m
c. o0.5470
31st March

m
c. o
Present Value 0.9174 0.8417 0.7722 0.7084 0.6499 0.5963

em
em s
Under the assumption that no probable future economic benefits except the return of

s Provide the journal entries at the time of initial recognition g
loan has been guaranteed by the employee, you are required to:
l a
gla i.
aof loan on 1 April, 2019
st

a and as at 31 March, 2020; and
st

ii. Prepare ledger account of 'Loan to Mrs. Jama Bai' from the inception of the loan till
its final payment. (14 Marks)

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 23 of 39

24 FINAL EXAMINATION: MAY 2023

(b) Discuss with respect to 'Conceptual Framework for Financial Reporting under Indian
Accounting Standards', 'faithful representation', one of the qualitative characteristics of
financial information. (6 Marks)
OR
Discuss the Organizational Structure / Issuing Authority of Integrated Reporting.
(6 Marks)
Answer
(a) (i) Journal Entry
Date Particulars Dr. Cr.
` `
1/4/2019 Loan to Mrs. Jama Bai A/c Dr. 10,43,638
Pre-paid employee cost A/c Dr. 1,56,362
To Bank A/c 12,00,000
(Being loan to employee recorded at fair
value)
31/3/2020 Loan to Mrs. Jama Bai A/c Dr. 93,927
To Finance Income A/c 93,927
(Being finance income @ 9% recorded in
the books)
31/3/2020 Bank A/c Dr. 3,00,000
To Loan to Mrs. Jama Bai A/c 3,00,000
(Being installment received at the end of
the year)
(ii) In the books of Autumn Ltd.
Loan to Mrs. Jama Bai A/c

Date Particulars Amount Date Particulars Amount
(`) (`)
1.4.2019 To Bank A/c 10,43,638 31.3.2020 By Bank A/c 3,00,000
31.3.2020 To Finance income 31.3.2020 By Balance
(W.N.3) 93,927 c/d 8,37,565
11,37,565 11,37,565
1.4.2020 To Balance b/d 8,37,565 31.3.2021 By Bank A/c 3,00,000

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 24 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 25

31.3.2021 To Finance income 31.3.2021 By Balance
(W.N.3) 75,381 c/d 6,12,946

m
m c. o
9,12,946 9,12,946

c o
. To Finance income
1.4.2021 To Balance b/d 6,12,946 31.3.2022 By Bank A/c 3,00,000
em
m a s
se l
31.3.2022 31.3.2022 By Balance

la ag
(W.N.3) 55,165 c/d 3,68,111

g
a 1.4.2022 To Balance b/d
6,68,111 6,68,111
3,68,111 31.3.2023 By Bank A/c 3,00,000
31.3.2023 To Finance income 31.3.2023 By Balance
(W.N.3) 33,130 c/d 1,01,241
4,01,241 4,01,241
1.4.2023 To Balance b/d 1,01,241 31.3.2024 By Bank A/c 40,000

m
31.3.2024 To Finance income 31.3.2024 By Balance
(W.N.3)
. c o 9,112 c/d
70,353

m
1.4.2024 To Balance b/d se 70,353 31.3.2025 By Bank A/c
1,10,353 1,10,353

l a
40,000

(W.N.3) a g
31.3.2025 To Finance income
6,332
31.3.2025 By Balance
c/d 36,685
76,685 76,685
1.4.2025 To Balance b/d 36,685 31.3.2026 By Bank A/c 40,000
31.3.2026 To Finance income
(W.N.3) 3,315*
40,000 40,000

o m
m .c
*Difference of ` 13 (` 3,315 – ` 3,302) is due to approximation.

c. o 1. Calculation of initial recognition amount of loan to employeese
Working Notes:
m
s em g la Present Value
gla Year Estimated Cash Flows
a
PV Factor @9%

a 31/3/2020
`
3,00,000
`
0.9174 2,75,220
31/3/2021 3,00,000 0.8417 2,52,510

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 25 of 39

26 FINAL EXAMINATION: MAY 2023

31/3/2022 3,00,000 0.7722 2,31,660
31/3/2023 3,00,000 0.7084 2,12,520
31/3/2024 40,000 (W.N.2) 0.6499 25,996
31/3/2025 40,000 (W.N.2) 0.5963 23,852
31/3/2026 40,000 (W.N.2) 0.5470 21,880
Fair Value of Loan 10,43,638

2. Computation of Interest to be paid

Year Opening Cash Flows Principal Interest @ Cumulative
outstanding outstanding 4% on a Interest
balance at year end
a b c d e
` ` ` `
31/3/2020 12,00,000 3,00,000 9,00,000 48,000 48,000
31/3/2021 9,00,000 3,00,000 6,00,000 36,000 84,000
31/3/2022 6,00,000 3,00,000 3,00,000 24,000 1,08,000
31/3/2023 3,00,000 3,00,000 Nil 12,000 1,20,000
31/3/2024 1,20,000 40,000
(1,20,000/3)
31/3/2025 40,000
(1,20,000/3)
31/3/2026 40,000
(1,20,000/3)

3. Computation of finance cost as per amortization table
Year Opening Balance Interest @ 9% Repayment Closing
Balance
(1) (2) (3) (1+2-3)
` ` ` `
1/4/2019 10,43,638
31/3/2020 10,43,638 93,927 3,00,000 8,37,565
31/3/2021 8,37,565 75,381 3,00,000 6,12,946
31/3/2022 6,12,946 55,165 3,00,000 3,68,111
31/3/2023 3,68,111 33,130 3,00,000 1,01,241

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 26 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 27

31/3/2024 1,01,241 9,112 40,000 70,353
31/3/2025 70,353 6,332 40,000 36,685

m
c. o
31/3/2026 36,685 3,315* 40,000 Nil

o m m
(b) EITHER .
c e
*Difference of ` 13 (` 3,315 – ` 3,302) is due to approximation.

emrepresentation l a s
s
lToa be useful, financial information must faithfully represent the substance of thea g
g
Faithful

a phenomena that it purports to represent. In many circumstances, the substance of an
economic phenomenon and its legal form are the same. If they are not the same,
providing information only about the legal form would not faithfully represent the
economic phenomenon.
To be a perfectly faithful representation, a depiction would have following three
characteristics:
 Complete: A complete depiction includes all information necessary for a user to

o m
understand the phenomenon being depicted, including all necessa ry descriptions
and explanations.
c
. bias in the selection or presentation of
m
e is supported by the exercise of prudence.
s
 Neutral: A neutral depiction is without

a
Prudence is the exercise oflcaution when making judgements under conditions of
financial information. Neutrality

g of prudence means that assets and income are not
uncertainty. The exercisea
overstated, and liabilities and expenses are not understated. Equally, the exercise
of prudence does not allow for the understatement of assets or income or the
overstatement of liabilities or expenses.
 Free from error: Free from error means there are no errors or omissions in the
description of the phenomenon, and the process used to produce the reported
information has been selected and applied with no errors in the process. In this
context, being free from error does not mean perfectly accurate in all respects. For

m
co
example, an estimate of an unobservable price or value cannot be determined to

m .
c. o
be accurate or inaccurate. However, a representation of that estimate can be

m
se
faithful if the amount is described clearly and accurately as being an estimate, the

em a
nature and limitations of the estimating process are explained, and no errors have

s g l
la
been made in selecting and applying an appropriate process for developing the

g
estimate.
a
a (b) OR
Integrated Reporting is a concept first introduced in South Africa. Later on , this concept
travelled to many countries like German, France, Spain, Brazil and UK and integrated
reporting was made along with their financial statements in one or the other manner. In

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 27 of 39

28 FINAL EXAMINATION: MAY 2023

2010, the International Integrated Reporting Council (IIRC) was set up which aims to
create the globally accepted integrated reporting framework.
The International Integrated Reporting Council (IIRC) is a global coalition of:
• Regulators
• Investors
• Companies
• Standard setters
• The accounting profession and NGOs
Together, this coalition shares the view that communication about value creation should
be the next step in the evolution of corporate reporting. With this purpose they issued
the International Integrated Reporting (IR) Framework.
Question 5
(a) A Limited operates in coating industry. Its business segments comprise Coating
(consisting of decorative, automotive, industrial paints and related activities) and Others
(consisting of chemicals, polymers and related activities).
Certain information for financial year 2022-2023 is given below:
All amounts in ` lakhs
Segments External revenue GST Other Result Assets Liabilities
(including GST) operating
income
Coating 1,20,000 3,000 24,000 6,000 30,000 18,000
Others 42,000 1,800 9,000 2,400 18,000 6,000
Additional Information:
i. Unallocated income net of expenses is ` 18,00,00,000
ii. Interest and bank charges is ` 12,00,00,000
iii. Income tax expenses is ` 12,00,00,000 (current tax ` 11,70,00,000 and deferred
tax ` 30,00,000)
iv. Unallocated Investments are ` 60,00,00,000 and other assets are ` 60,00,00,000.
v. Unallocated liabilities, Reserve & Surplus and Share Capital are ` 1,20,00,00,000,
` 1,80,00,00,000 & ` 60,00,00,000 respectively.
vi. Depreciation amounts for coating & others are ` 6,00,00,000 and ` 1,80,00,000
respectively.

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 28 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 29

vii. Capital expenditure for coating and others are ` 30,00,00,000 and ` 12,00,00,000
respectively.

m
c. o
viii. Revenue from outside India is ` 3,72,00,00,000 and segment asset outside India

m
co
` 60,00,00,000.

. em
s
Based on the above information, how A Limited would disclose information about

m
e
reportable segment, revenue, profit or loss, assets and liabilities for financial year
l a
l a s (16 Marks)a
2022-2023. Ignore corresponding figures for the previous year. Give figures in ` lakhs.
g
a(b)g TCO Limited is a telecom operator. Laying cables across the world is a requirement to
enable the entity to run its business. Cables are also laid under the sea and contracts
are entered into for the same. By virtue of laws of the countries through which the cable
passes, the entity is required to restore the sea bed at the end of the contract period.
Discuss the nature of obligation that TCO Limited has in such a case. (4 Marks)
Answer

m
(a) Segment information

c o
(1) the company’s operating segments.comprise:
Information about operating segment

s em automotive, industrial paints and related
la
Coatings: consisting of decorative,
activities.
g
a polymers and related activities.
Others: consisting of chemicals,
(2) Segment revenues, results and other information: (` in lakhs)
Revenue Coating Others Total
1. External revenue (gross) 1,20,000 42,000 1,62,000
GST (3,000) (1,800) (4,800)
Total revenue (net) 1,17,000 40,200 1,57,200

m
c. o
Other operating income 24,000 9,000 33,000

m
c. o
Total Revenue 1,41,000 49,200 1,90,200

em 8,400
s2,400
em
2. Results

s g la
Segment results 6,000

gla Unallocated income (net of unallocated
a
a
expenses) 1,800
Profit from operation before interest,
taxation and exceptional items 10,200
Interest and bank charges (1,200)

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 29 of 39

30 FINAL EXAMINATION: MAY 2023

Profit before exceptional items 9,000
Exceptional items Nil
Profit before taxation 9,000
Income taxes
Current taxes (1,170)
Deferred taxes (30)
Profit after taxation 7,800
3. Other information
(a) Assets
Segment assets 30,000 18,000 48,000
Investments 6,000
Unallocated assets 6,000
Total assets 60,000
(b) Liabilities and Shareholder’s funds
Segment liabilities 18,000 6,000 24,000
Unallocated liabilities 12,000
Share capital 6,000
Reserves and surplus 18,000
Total liabilities and shareholder’s funds 60,000
(c) Others
Capital expenditure (3,000) (1,200) (4,200)
Depreciation (600) (180) (780)
Geographical Information India Outside Total
India
Revenue 1,53,000 37,200 1,90,200
Segment assets 54,000 6,000 60,000
Capital expenditure 4,200 4,200
Notes:
(i) The operating segments have been identified in line with Ind AS 108, taking into
account the nature of products, organisation structure, economic environment and
internal reporting system.
(ii) Segment revenue, results, assets and liabilities include the respective amounts
identifiable to each of the segments. Unallocable assets include unallocable non -

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 30 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 31

current assets and other current assets. Unallocable liabilities include unallocable
current liabilities and net deferred tax liability.

m
c. o
(b) Paragraph 14 of Ind AS 37 states that a provision shall be recognised when:

m
co m
(a) an entity has a present obligation (legal or constructive) as a result of a past event;

m .
(b) it is probable that an outflow of resources embodying economic benefits will be
s e
s e
required to settle the obligation; and
g l a
l a a
ag IfFurther,
(c) a reliable estimate can be made of the amount of the obligation.
these conditions are not met, no provision shall be recognised.
with regard to past event paragraph 17 of Ind AS 37 states that a past event
that leads to a present obligation is called an obligating event. For an event to be an
obligating event, it is necessary that the entity has no realistic alternative to settling the
obligation created by the event. This is the case only:
(a) where the settlement of the obligation can be enforced by law; or
(b) in the case of a constructive obligation, where the event (which may be an action

m
of the entity) creates valid expectations in other parties that the entity will discharge

. co
the obligation.

em
Applying the above guidance in the given scenario, provision should be recognised as

a s
soon as the obligating event takes place because the entity is under legal obligation to

g l
restore the seabed, provided the other recognition criteria stated in paragraph 14

a
reproduced above are met. Moreover, the amount of the provision would depend on the
extent of the obligation arising from the obligating event. In the instant case, an
obligating event is the laying of cables under the sea. To the extent the cables hav e
been laid down under the sea, a legal obligation has arisen and to that extent provision
for restoration of seabed should be recognised.
Question 6
(a) Discuss the following situations as per Ind AS 10:
i. The financial statements of a Company for the year 2021-2022 are approved by the

m
co
management and were sent on 5 th June, 2022 for review and approval to its

m .
c. o
supervisory board i.e., Board of Directors. The supervisory board approves the

m
se
financial statements on 26 th June, 2022. The financial statements are then made

em la
available to shareholders on 4 th July, 2022. The financial statements are approved

las g
by shareholders in their annual general meeting on 18 th August, 2022 and then filed

g a
with Ministry of Corporate Affairs (MCA) on 19 th August, 2022. Determine & discuss

a ii.
the date on which financial statements were approved.
A Company is in litigation with Income Tax Department with respect to allowability
of certain exemptions for financial year 2018-2019. No provision for tax has been
made for disallowances of exemptions as the Company was under bonafide belief

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 31 of 39

32 FINAL EXAMINATION: MAY 2023

based on a legal opinion that it will succeed in litigation. On 21 st April, 2023, the
Hon'ble Supreme Court rejected the Company's claim. The Order is received on
30th April, 2023. The financial statements for the financial year 2022-2023 of the
Company are yet to be approved. The earlier year’s financial statements stands
approved. Advise in financial statements of which financial year the impact of the
Order of the Hon'ble Supreme Court should be recognized.
iii. Z Limited while preparing its financial statements on 31st March, 2023 made a
provision for doubtful debts @ 6% on accounts receivables. In the last week of
January, 2023, a debtor for ` 3 lakhs had suffered heavy loss due to fire; the loss
was not covered by any insurance policy. Z Limited, considering the event of fire
made a provision @ 60% of the amount receivables from that debtor apart from the
general provision @ 6% on remaining debtors. The same debtor was declared
insolvent on 10 th April, 2023. The financial statements have not yet been approved.
You are required to suggest whether the company should provide for the full loss
arising out of insolvency of the debtor in the financial statements for the year ended
31st March, 2023.
iv. D Limited acquired equity shares of another company on 1st March, 2023 at a cost
of ` 28 lakhs. The fair market value of these shares on 31 st March, 2023 was
` 35 lakhs and the company measured it at ` 35 lakhs (assume that it is classified
as FVTOCI as per Ind AS 109 and change in fair value is transferred to 'fair value
fluctuation reserve'). Due to market conditions subsequent to the reporting date,
the value of investments drastically came down to ` 20 lakhs. The financial
statements have not yet been approved. You are required to suggest whether
D Limited should value the investments at ` 35 lakhs or ` 20 lakhs as on
31st March, 2023.
v. Tanmay Limited was in negotiation with Varun Limited from 1st December, 2022 to
acquire land for ` 5.00 crores. The negotiations were concluded in the first week
of April 2023. The transaction was completed by last week of April, 2023. In which
financial year, the purchase of land should be recognized? (5 Marks)
(b) Weak Limited, which is a fully owned subsidiary company of Strong Limited approached
Strong Limited for an interest free loan for mitigation of its financial difficulties.
Strong Limited provided the loan to Weak Limited on the following terms & conditions:
Nature of loan Interest Free
Amount of loan ` 60,00,000
Date of disbursement of loan 1 st April, 2021
Loan period 3 years
Loan repayable by Weak Ltd. On 31 st March, 2024

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 32 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 33

Market rate of interest for similar 8% (both for holding and subsidiary) per annum
loan

m
c. o
P.V. factor of ` 1 at the end of 0.7938

m
co
3 rd year at 8% per annum is

. em
m s
Assuming that there are no transaction costs, you are required to pass necessary

s e
accounting entries in the books of Weak Limited for all the three years. (5 Marks)
l a
l a ag
ag
(c) Summer Solutions Limited is engaged in the manufacturing of customized gifts for its
corporate customers. On 1 st December, 2022, the company received an order from
Rain Limited for the supply of 15,000 customized corporate gifts. On
4 th December, 2022, to meet the order, Summer Solutions Limited purchased 20,000 kg
of certain material at ` 110 per kg. The purchase price includes GST of ` 10 per kg in
respect of which full GST credit is admissible. Freight incurred amounted to ` 1,00,000.
During January, 2023, the company incurred the following expenses to design the
corporate gift for Rain Limited:
• Fee to external designer ` 20,000

m
co
• Labour ` 8,000

.
em
After checking the sample of gift, the management of Rain Limited did not approve the

s
design of gift and suggested some modifications. Consequently, the production team of

l a
Summer Solutions Limited made modifications to bring the inventories as per the
g
a
conditions specified in the order.
Following costs were incurred during testing phase:
• Materials ` 45,000
• Labour ` 20,000
• Depreciation of plant used during testing phase ` 7,000
Some of the materials used during testing phase was scrapped and sold for ` 5,000.

m
During February, 2023, Summer Solutions Limited incurred the following additional costs

c. o
in the manufacturing of customized corporate gifts:

m
c. o m
•

se ` 1,42,000
Consumable stores ` 1,25,000

em la
• Labour

las •
a g
Depreciation of plant used in manufacturing of customized corporate gifts:
` 38,000

ag On 15 March, 2023, the customized gifts were ready for delivery. There was no
th

abnormal loss during the manufacturing process.
You are required to compute the cost of customized gifts. Your answer should be
supported by appropriate reasons and calculations wherever necessary. (5 Marks)

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 33 of 39

34 FINAL EXAMINATION: MAY 2023

(d) On 1 st April 2021, P Limited acquired 100% interest in S Limited for ` 75.00 lakhs when
the fair value of the net assets of S Limited was ` 60.00 lakhs. Goodwill of ` 15.00 lakhs
arose on consolidation. On 31 st March, 2023, P Limited disposed off 80% interest in
S Limited for ` 114.00 lakhs. As on the date of disposal, the carrying value of the net
assets of S Limited excluding goodwill was ` 1,20,00,000. The fair value of the
remaining interest is ` 28,50,000.
You are required to:
i. Calculate the gain or loss on sale of disposal, and
ii. Pass necessary journal entries on disposal of 80% interest in S Limited in
P Limited's separate and consolidated financial statements as on 31st March, 2023.
(5 Marks)
Answer
(a) i. As per Ind AS 10, in the case of a company, the financial statements will be treated
as approved when board of directors approves the same. Hence in the given case,
the financial statements are approved for issue on 26 th June, 2022 (date of approval
by the Board of Directors for issue of financial statements to the shareholders).
ii. An event after the reporting period is an adjusting event if it provides evidence of a
condition existing at the end of the reporting period. Court order received after the
reporting period (but before the financial statements are approved) provides
evidence of the liability existing at the end of the reporting period. Therefore, the
event will be considered as an adjusting event and, accordingly, the amount will be
adjusted in financial statements for the financial year 2022-2023.
iii. In the instant case, the fire took place in January, 2023 (i.e. before the end of the
reporting period). Therefore, the condition existed at the end of the reporting date
though the debtor is declared insolvent after the reporting period. Accordingly, full
provision for bad debt amounting to ` 3 lakhs should be made to cover the loss
arising due to the bankruptcy of the debtor in the financial statements for the year
ended 31 st March, 2023.
iv. A decline in fair value of investments between the end of the reporting period and
the date when the financial statements are approved for issue is a non -adjusting
event. The decline in fair value does not normally relate to the condition of the
investments at the end of the reporting period but reflects circumstances that have
arisen subsequently. Therefore, D Limited should value the investments at
` 35 lakhs as on 31 st March, 2023.
v. As per Ind AS 10, an entity should adjust the financial statements for the events
that occurred after the reporting period, but before the financial statements are
approved for issue, if those events provide evidence of conditions that existed at
the end of the reporting period.

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 34 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 35

In this case, negotiations continued with Varun Limited to acquire land from
1 st December, 2022 till first week of April, 2023. Since on the reporting date, the

m
condition was only on proposal state and transaction was completed on 1 st week of

m c. o
April 2023, the event will be considered as a non-adjusting event as per Ind AS 10.

co m
Purchase of land should be recognized in the financial year 2023-2024.

m . s e
e a
However, the same may be disclosed in the Notes to Accounts for due information

s l
a ag
to the users of the financial statements.

g l
(b) Accounting in the books of Weak Ltd (Subsidiary)
a Date Particulars Amount Amount
On the date of loan
1.4.2021 Bank A/c Dr. 60,00,000
To Loan from Strong Ltd. (Payable) 47,62,800
To Equity (Deemed capital contribution 12,37,200
from ABC Ltd.)
(Being the loan taken from Strong Ltd.
m
co
recognised at fair value)

.
em
At the end of Year 1

s
31.3.2022 Interest expense (Finance cost) Dr. 3,81,024

g l a
To Loan from Strong Ltd. (Payable) 3,81,024

a
(Being interest expense recognised)
At the end of Year 2
31.3.2023 Interest expense (Finance cost) Dr. 4,11,506
To Loan from Strong Ltd. (Payable) 4,11,506
(Being interest expense recognised)
At the end of Year 3
31.3.2024 Interest expense (Finance cost) Dr. 4,44,670*

m
c. o
To Loan from Strong Ltd. (Payable) 4,44,670
m
c. o m
(Being interest expense recognised)

s e
em la 60,00,000
On repayment of loan

las 31.3.2024 Loan from Strong Ltd. (Payable) Dr.
a g
60,00,000

ag
To Bank A/c
(Being loan repaid by Weak Ltd.)
*Difference is due to approximation.

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 35 of 39

36 FINAL EXAMINATION: MAY 2023

Working Notes:
1. Present Value of Loan = ` 60,00,000 x 0.7938 = ` 47,62,800
2. Amortisation table for computation of interest:
Year Opening balance Interest @ 8% Repayment Closing balance
end (1) (2) (3) (1) + (2) - (3)
1 47,62,800.00 3,81,024.00 - 51,43,824.00
2 51,43,824.00 4,11,506.00 - 55,55,330.00
3 55,55,330.00 4,44,670.00* 60,00,000.00 -
*Difference is due to approximation.
(c) Statement showing computation of inventory cost
Particulars ` Reasons
Costs of purchase of 21,00,000 Purchase price of raw material net of GST
raw material plus freight [{20,000 x (110-10)} + 1,00,000]
Costs of purchase of 1,25,000 Purchase price of consumable stores
consumable stores
Costs of conversion 1,42,000 Direct costs — labour
Production overheads 38,000 Fixed costs — depreciation
Production overheads 28,000 Product design costs and labour cost for
specific customer
Other costs 67,000 Refer working note
Total cost of inventories 25,00,000
Working Note:
Costs of testing product designed for specific customer:
` 40,000 material (net of ` 5,000 recovered from the sale of scrapped output) + ` 20,000
labour + ` 7,000 depreciation = ` 67,000
(d) (a) In P Ltd.’s Separate Financial Statements
(i) Calculation of Gain or Loss on disposal in P Ltd.’s separate financial
statements
` in lakhs
Sales proceeds 114.0
Less: Cost of investment in subsidiary (75 x 80%) (60.0)
Gain on sale in parent’s account 54.00

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 36 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 37

(ii) Journal Entry in P Limited’s separate financial statements ` in lakhs
Date Particulars Dr. Cr.
m
m c. o
31.3.2023 Bank A/c Dr. 114.00

.co Investment in Associates Dr. 15.00

s em
e m l a
s
To Investment in subsidiary A/c 75.00

l a ag
ag
To Gain on sale of subsidiary A/c 54.00
31.3.2023 Gain on sale of subsidiary A/c Dr. 54
To Statement of Profit and Loss 54

Note: In case of partial disposal of investment leading to significant influence
because of loss of control, the above solution has been provided by applying
proportionate approach. However, cost of retained investment on the date of loss

m
of control has not been defined in Ind AS 27 ‘Separate Financial Statements’.

. co
Therefore, paragraphs 10 and 11(a) of Ind AS 8 (i.e. in the absence of accounting

em
policy that specifically applies to a transaction, management shall refer to, and

s
consider the applicability of the requirements in Ind AS dealing with similar and

g l a
related issues) have been applied. Further, para 25(b) of Ind AS 110 inter alia

a
states that recognition of investment retained in the former subsidiary to be the fair
value which shall be regarded as the fair value on initial recognition of a financial
asset in accordance with Ind AS 109 or, when appropriate, the cost on initial
recognition of an investment in an associate or joint venture.
Accordingly, following ALTERNATE solution may also be considered:
(i) Calculation of Gain or Loss on disposal in P Ltd.’s separate financial
statements:

m
c. o114.0
` in lakhs

m
c. o
Sales proceeds

em 142.50
em s
Fair value of 20% interest retained 28.50

s g la
gla Less: Cost of investment in subsidiary
a (75.0)

a Gain on sale in parent’s account 67.5

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 37 of 39

38 FINAL EXAMINATION: MAY 2023

(ii) Journal Entry in P Limited’s separate financial statements ` in lakhs

Date Particulars Dr. Cr.
31.3.2023 Bank A/c Dr. 114.00
Investment in Associate at cost (as per 28.50
para 25 Ind AS 110) Dr.
To Investment in subsidiary A/c 75.00
To Gain on sale of subsidiary A/c 67.50
31.3.2023 Gain on sale of subsidiary A/c Dr. 67.50
To Statement of Profit and Loss 67.50

(b) In P Ltd.’s Consolidated Financial Statements
(i) Calculation of Gain or Loss on disposal in P Ltd.’s consolidated financial
statements
` in lakhs
Sales proceeds 114.00
Fair value of 20% interest retained 28.50
142.50
Less: Net assets disposed, including goodwill
(1,20,00,000 + 15,00,000) (135.00)
Gain on sale in the group’s financial statements 7.50

(ii) Journal Entry in P Limited’s consolidated financial statements ` in lakhs

Date Particulars Dr. Cr.
31.3.2023 Bank A/c Dr. 114.00
Fair value of Net identifiable assets Dr. 28.50
To Net asset of subsidiary A/c 120.00
To Goodwill 15.00
To Gain on sale of subsidiary A/c 7.50
31.3.2023 Gain on sale of subsidiary A/c 7.50
To Statement of Profit or Loss 7.50

© The Institute of Chartered Accountants of India
For more Question Papers, Sample Papers, Notes & Syllabus visit Page 38 of 39

m
m .co
c. o

e m
em l a s
s a g
PAPER – 1 : FINANCIAL REPORTING 39

Note:

m
The above solution has been drawn on the assumption that the retained investment

m c. o
had led to significant influence. Accordingly, investment in an associate has been

.c o
accounted for on partial disposal of investment by P Ltd.
e m
eofmcontrol due to partial disposal of investment, does not lead to significant influence gla
However, it may alternatively be assumed that the retained investment, after loss
s
s
la onLtd.’sS Ltd. In such a situation, retained interest will be measured at fair value in Pa
g
a solutionSeparate Financial Statements as given in the alternate solution and main
will not be applicable in such a case.

m
. co
s em
g l a
a

m
m .co
c. o se
m
s em g la
gla a
a

m .
.co s e m
m
e Accountants of India l a
l a s a g
g
© The Institute of Chartered
a For more Question Papers, Sample Papers, Notes & Syllabus visit Page 39 of 39