Financial Reporting
(Ind AS 24,20,8,10,37,41,113,34,108,33,7)
Maximum Marks – 60
Time Allowed – 1 Hour 40 Minutes
Marks
1. Whether statement of cash flows should be prepared only for annual reporting period? 3
2. Zink Ltd has no foreign currency cash flow for the year 2020. It holds some deposit in a bank 3
in the USA. The balances as on 31.12.2020 and 31.12.2021 were US $ 100,000 and US $
102,000 respectively. The exchange rate on December 31, 2020 was US $1= ` 45. The same
on 31.12.2021 was US $ 1= ` 50. The increase in the balance was on account of interest
credited on 31.12.2021. Thus, the deposit was reported at ` 45,00,000 in the balance sheet as
on December 31, 2020. It was reported at ` 51,00,000 in the balance sheet as on 31.12.2021.
How these transactions should be presented in cash flow for the year ended 31.12.2021 as per
Ind AS 7?
3. Mr. X an employee of Induga Ltd. went on leave with pay for 9 months on 01 01-2021 upto 4
30-09-2021. His monthly pay was ` 15000 while preparing the financial statement on
30.6.2021 for the year ended 31.03.2015, the expense of salary of Mr. X for 3 months
(01.01.2021 to 31.03.2021) was not provided due to omission. When Mr. X joined on 01-10-
2021 the whole salary for 9 months (01.01.2021 to 30.09.2021) was paid to him. How this
should be treated as per Ind AS-8? Suppose Mr. X was terminated from service on
01.01.2021 and restated in service by the court order on 30.09.2021 with all back salary and
Company accepted the court verdict. Suggest the treatment as per Ind AS-8.
4. A company entered into an agreement to sell its immovable property included in the Balance 3
Sheet at ` 5 lakhs to another company for ` 20 lakhs. The agreement to sell was concluded
on 31/01/2021 and the sale deed was registered on 30/04/2021. How this will be treated in
Balance Sheet as on 31/03/2021
5. Company XYZ Ltd. was formed to secure the tenders floated by a telecom company for 4
publication of telephone directories. It bagged the tender for publishing directories for Pune
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circle for 5 years. It has made a profit in 2017-2018, 2018-2019, 2019-2020 and 2020-2021.
It bid in tenders for publication of directories for other circles Nagpur, Nasik, Mumbai, and
Hyderabad but as per the results declared on 23rd April, 2021, 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 2021. The financial
statements for the F.Y. 2020-21 have been approved by the Board of Directors on July 10,
2021. Whether it is appropriate to prepare financial statements on going concern basis?
6. In which of the following circumstances might a provision be recognized? 4
(a) On 13.12.2021, the board of directors of an entity decided to close down a division.
The accounting date of the company is 31.12.2021. Before 31.12.2021 the decision was
not communicated to any those were taken to implement the decision. and no other
steps
(b) The board agreed a detailed closure plan on 20.12.2021 and details were given to
customers and employees.
(c) A company is obliged to incur cleanup costs for environmental damages (that has
already been caused)
(d) A company intends to carry out future expenditure to operate in a particular way in the
future
7. Sun Limited has entered into a binding agreement with Moon Limited to buy a custom made 4
machine for ` 400000. At the end of 2020-21, before delivery of the machine, Sun Limited
had to change its method of production. The new method will not require the machine
ordered which is to be scrapped after delivery. The expected scrap value is Nil. Given that
the asset is yet to be delivered, should any liability be recognised for the potential loss? If so
give reasons for the same, the amount of liability as well as the accounting entry.
8. Company X purchased 100 sheep at an auction for ` 60000 on 31st December 2020. The 4
transportation cost amounting to be ` 1500 and the auctioneer's fees amounted to be 1% of
sales price. At what value would the sheep be measured in the Balance sheet and what
gain/loss would be shown in the statement of profit and loss?
Suppose the fair value of the sheep rises to ` 70,000 on 30th June 2021. At what would the
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sheep be measured in the balance sheet and what gain/loss would be recognized in the
statement of profit and loss?
9. A Ltd owns 30% of share of B Ltd and has the ability to exercise significant influence over 4
it. B Ltd holds the 70% of the share of its subsidiary C Ltd and 30% of the share of D Ltd
with the ability to exercise significant influence. A Ltd transacts with C Ltd and D Ltd.
Should A Ltd disclose these transactions as related party transactions?
10. X Ltd is a venturer and enjoys joint control over Y Ltd. Y Ltd has 9 subsidiaries and 10 4
associates.
(a) Is Y Ltd including all its subsidiaries and associates are related parties to X Ltd?
(b) Is X Ltd a related party of Y Ltd and all of its subsidiaries and associates?
(c) Is a subsidiary of Y Ltd a related party to another subsidiary?
(d) Is an associate of Y Ltd a related party of its another associate or subsidiary?
11. On 01.04.2020, KP Ltd acquired 20% equity interest in BP Ltd for ` 210 lakhs. Carrying 4
amount of net assets of BP Ltd is ` 800 lakhs and fair value ` 1000 lakhs. The difference
arises out of the fair value of depreciable assets. The carrying amount of depreciable assets of
BP Ltd ` 400 lakhs, the fair value of which are determined at ` 600 lakhs for the purpose of
acquisition of 20% stake by KP Ltd. During the year 2020-21, profit after tax BP Ltd is ` 80
lakhs (which is arrived at after charging depreciation of ` 35 lakhs based on the carrying
amount). Show the equity method accounting of associated.
12. How will you recognize and present the grants received from the Government in the 5
following cases as per Ind AS 20?
(i) A Ltd. received one acre of land to setup a plant in backward area (fair value of land 12
lakhs and acquired value by Government is ` 8 Lakhs).
(ii) B Ltd. received an amount of loan for setting up a plant at concessional rate of interest
from the Government.
(iii) D Ltd. received an amount of ` 25 lakhs for immediate start-up of a business without
any condition.
(iv) S Ltd. received ` 10 lakh for purchase of machinery costing ` 80 lakh. Useful life of
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machinery is 10 years. Depreciation on this machinery is to be charged on straight line
basis.
(v) Government gives a grant of ` 25 lakh to U Limited for research and development of
medicine for breast cancer, even though similar medicines are available in the market but
are expensive. The company is to ensure by developing a manufacturing process over a
period of two years so that the cost comes down at least to 50%.
13. Navya Ltd. manufacturer of ceramic tiles has shown a net profit of ` 15,00,000 for the 1st 4
quarter of 2020-21. Following adjustments were made while continuing the net profit:
(i) Bad debts of ` 1,64,000 incurred during the quarter. 75% of the bad debts have been
deferred for the next 3 quarters (25% for each quarter).
(ii) Sales promotion expenses of ` 5,00,000 incurred in the 1st quarter and 90% expenses
deferred to the next 3 quarters (30% for each quarter) on the basis that the sales in these
quarters will be high in comparison to 1st quarter.
(iii) Additional depreciation of ` 3,50,000 resulting from the change in the method of
depreciation has been taken into consideration.
(iv) Extraordinary loss of 1,36,000 incurred during the quarter has been fully recognised in
this quarter.
Discuss the treatment required under Ind AS-34 and ascertain the correct net profit to be
shown in the Interim Financial report of 1st quarter to be presented to the Board of Directors.
14. Hyundai Ltd is a well-known, publicly listed automobile dealership. Based on the decision of 3
the CEO, the entity is managed and controlled through three divisions: the spare parts
division, the workshop division, and the sales division. Both the sales division and the
workshop division deal with external customers and handle orders of both walk-in customers
as well as long-term customers who have purchased cars through earlier sales through this
dealership. The entity's spare parts division, however, only supplies spare parts to its
workshop division and does not cater to the demands of any outside customers. In other
words, if outside customers desire to purchase spare parts directly from the spare parts
division of Hyundai, they cannot do so unless their automobiles are serviced by the workshop
division of Hyundai and the workshop division (of Hyundai.) purchases spare parts from its
spare parts division for the purposes of undertaking repairs of vehicles they have been
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contracted to undertake repair work for.
The CODM, in this case, is the CEO of Hyundai. He is responsible for allocating resources
and assessing performance based on the results of the three components: the spare parts
division, the workshop division, the sales division, for which Hyundai's financial controller
maintains separate and discrete financial information. For the purposes of Ind AS-108, how
many operating segments should Hyundai Ltd report segmental disclosures for?
15. ` 1,00,000, 6% debenture issue was sold on April 1, 2021, convertible into ` 10,000 ordinary 3
shares. Assuming that profit of ` 2,00,000 Weighted Average of ordinary Shares (WAOS) is
` 1,00,000 and the effective tax rate is 40%. Calculate EPS and diluted EPS as on 31-12-
2021.
16. K Limited is a listed entity that made a profit after tax of ` 350 Lakhs for the year ended 30 4
September 2020. There were no discontinued operations. At 1st October 2019, K Limited
had ` 700 lakhs ordinary shares and ` 300 lakhs preference shares in issue. The preference
shares were correctly presented within the statement of financial position. In the year ended
30 September 2018, K Limited declared and paid a dividend of 12 paise share to the ordinary
shareholders and 6 paise per share to the preference shareholders.
On 31 December 2019, K Limited made a fully subscribed rights issue of 2 ordinary shares
for every 7 held at ` 1.35 per share. The fair value of an ordinary share at 31 December 2019
was ` 1.80.
Throughout the financial year K Limited had ` 200 Lakhs convertible loan notes on which
interest of 5 paise per note was payable annually in arrears. The carrying value of the liability
element of the loan note at 1st October 2019 was ` 230 Lakhs and the effective rate of
interest was 7 %. The rate of income tax is 20 % and the finance cost that is charged in the
statement of profit & loss is subject to income tax at that rate.
The notes are convertible into ordinary shares from 1st October 2021 at the option of the note
holder. The conversion terms are one ordinary share for every loan note held.
Compute the basic and diluted EPS of K Limited for the year ended 30 September 2020.
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