Module-6

Index
Chapter
Particulars Page Range
No.
1 CHAPTER 01 FAIR VALUE IND AS 113
Part -1 1-5
Part -2 5-8
Part -3 9-10
2 CHAPTER 02 EVENT AFTER BALANCE SHEET IND AS 10
Part -1 11-13
Part -2 13-15
Part -3 15-17
3 CHAPTER 03 PRESENTATION OF FS IND AS 1
Part -1 18-20
Part -2 20-22
Part -3 22-29
Part -4 29-31
4 CHAPTER 04 INTERIM FINANCIAL STATEMENTS IND AS 34
Part -1 32-32
Part -2 32-34
Part -3 34-37
Part -4 38-40
Part -5 40-42
5 CHAPTER 05 CASH FLOW STATEMENTS IND AS 7
Part -1 43-46
Part -2 46-49
Part -3 49-54
Part -4 55-57
6 CHAPTER 06 ACCOUNTING POLICY IND AS 8
Part -1 58-62
Part -2 62-63
Part -3 63-65
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CA-Final Financial Reporting 1

Chapter 1 - Ind AS: 113

Fair Value Measurements
*Part 1*

Concept 1 : What is the need of “Fair Value”

As per the Provisions of Ind AS 113, Fair value for Assets & Liabilities
may be required for initial Recognition, Subsequent measurements and
Disclosures Purpose Under other various Ind AS. The following
Examples may be Referred regarding need Of Fair value under other
Ind AS :-

i. Ind AS 105 : Fair value is required for initial Recognition of Held

for Sale Assets
ii. Ind AS 109 : Fair value is required for initial Recognition &
Subsequent Measurements of Financial Instruments
iii. Ind AS 41 : Fair value is required for initial Recognition and
Subsequent Measurement of Biological Assets &
Agricultural Produce
iv. Ind AS 16 : Fair value is required for Revaluation of PPE
v. Ind AS 40 : Fair value is required for Disclosure of Properties.

Out of Scope of Ind AS 113 :

i. Fair value of Options under Share Based Payments

These are valued as per Option Price model

ii. NRV of Inventories under Ind AS 2
iii. VIU of Assets/ CGU under Ind AS 36
CA-Final Financial Reporting 2

Concept 2 : Meaning of “Fair value”

Meaning of Fair value : Fair value is the Price which would be received to
sell the Assets Or would be Paid to Settle the
Liability in an Orderly Transaction between the
Market Participants at the measurement date
in Current Market conditions.

Components in Fair value

[Link]/Liab B. Transaction C .Market Participants D. Price

Components A : Assets / Liabilities

As per the Provisions of Ind AS 113, Fair value measurement will be

made after considering “Location”, “Condition” and “Restriction to
sell or use” of Assets & Liabilities. If any Restriction has been
imposed on Entity then It will not be considered for Fair value
measurement. It means that Restriction of use/ Sell on
Assets & Liab. are only considered, but on Entity are not considered.

Example:

Restriction on Entity Restriction on Assets

If A company cannot construct If a Land can be used only for

Commercial Buildings on Land as Residential Purpose then It is a
per “AOA” then It will not be restriction on land And It will
considered while fair Value affect Fair value of land because
measurement of land because land is not available for use for all
Restriction is not on land Purpose.

Summary

Restriction on Entity = Does it affect F.V of A/c = No

Restriction on A/c = Does it affect F.V. = yes
CA-Final Financial Reporting 3

Component B : Transaction

As per the Provisions of Ind AS 113, Transaction may be conducted

through “Principal Market” or “Most Advantageous Market”. We can
consider most Advantageous market only in the absence of Principal
market.

i. Principal Market : It is the readymade Platform for sale of

Assets in which Identical and Comparable Assets are Traded at
High volumn. For Example, Securities can be Trade through NSE/
BSE. These are Principal markets
Note : If more than one Principal markets are observed then we will
consider the Principal Market where volumn of Transaction is
very high.
ii. Most Advantageous Market : This market is observed only if we
don’t have Principal market for Trade of Assets. In this
market we consider maximum sale Proceeds that can be recovered
form sale of Asset

Example : We want to sell “ an old car”

No Principal market does Exist for old cars

We will Go in Most Advantageous Market

Offer A : Offer B : OLX Offer C :

Buyer = 200,000 250000 Exchange value 180000

([Link]) Maximum value in Most

Advantageous Market
CA-Final Financial Reporting 4

Component C : Market Participants

As per the Provisions of Ind AS 113, Market Participants are Parties
which eventually Transact Assets/ Liab. in Current Market conditions.
These Parties are not under any Pressure/ Force for Transaction and
these parties have sufficient Knowledge

Component D : “Price”

Price

Principal Market Most Advantageous Market

i. Transaction Cost : No Yes

ii. Transportation Cost : Yes Yes

Notes :
A. While computing Price/ Fair value, we should consider some
expenses which are Related with Sale of Assets
B. In Principal Market, we will not include Transaction cost because
these expenses are incurred according to Market standards but
not related with Particular Asset.

Solution of Q.1

i. If A Market is Principal Market

Selling Price 26
Transaction Cost NA
Transportation Cost (2)
FV 24

Note :
1. Transaction Cost is not relevant for Principal Market
2. We will not refer Market B because volumn of Transaction is high
in Market A
CA-Final Financial Reporting 5

ii. None market is Principal Market

Here we will consider Maximum Sale Proceeds as follows :

A B
SP 26 25
- TC (3) (1)
- TC (2) (2)
Fv 21 22

*Rs.22 is higher than 21, So we will consider Market B if there is no

Principal Market.

*Part 2*

Concept 3 : Valuation Techniques

Fair value Measurements Techniques

i. Market Approach
ii. Income Approach
iii. Cost Approach (Less Popular)
CA-Final Financial Reporting 6

Summarised Presentation

Market Approach Income Approach Cost Approach

We use “Market We use “Discounted We use “Replacement

value” For similar cash flows” which Cost” which is
/ Identical A/c are Expected Expected to be
in Future paid if we replace
Ist Preference the Existing Assets
IInd Preference
(if Market value cannot be IIIrd Preference
determined) (If Market value
is not available for
similar items as well
as Cash inflow can
also not be identified)
*Imp
Concept 4 : “Inputs for Fair value Measurements”

Inputs

Observable Inputs Unobservable Inputs

Level III Input

Level I Level II
Discounted Cash Flows
“Market Approach”

Level I : If there is an active market for Similar or Identical Assets/

Liabilities and we can use “Market Value” of Similar A/c
without any adjustment then It is Level I Input.
(i.e., we use closing Prices as Market value for Valuation of
Securities)
CA-Final Financial Reporting 7

Level II : i) If there is an active Market for similar or identical A/c

and we can use Market value of identical items as Fair value,
but Subject to some adjustment Then It will be taken as
Level II Input.

OR

ii) If there is no any active Market, but we can Estimate Maximum

Sale Proceeds or Minimum Payments for Assets or Liabilities in most
Advantageous market subject to Some Adjustments.

Level III : It is an Unobservable Input in market due to which we may

need to Estimate Assets own cash flows for Fair value
Measurement.

Concept 5 : Unit of F.V Measurement

i. If Independent Valuation can be made then single Asset/Liab

will be considered as Unit of measurement.
ii. If Group of A/c is required to be valued together then Group will
be considered as unit of Valuation (i.e., CGU)

Solution of Q.4 , Q.5, Q.3 (Discussed in class)

Solution of Q.2

In the Given case, we will use Level II Input because we may require
some adjustments to obtain max. sale Proceeds. The best use of this
Land may be Higher of below two outputs :-

1. We should measure Sale Proceeds from Industrial Factory

2. We should measure Sale Proceeds from Sale of Plain Land for
Residential Purpose.
While computing Sale proceeds from Plain Residential land, we will
consider cost of Demolish the Building.
CA-Final Financial Reporting 8

Solution of Q.1 ( Extra Question)

In the Given case, we cannot use Investment 3 for computing

Interest Rate because It has Expected cash flow at the end of year
2, but we have Expected Cash Flow in year I. so, we will use
Investment 2 for the said Purpose.

1. Calculation of Interest Rate in Invest.2

Cash Flow at the end of Ist year 1200

Market value (Existing) (1083)
Interest 117

IR = 117 x 100 = 10.80%

1083

2. F.V of Investment I = 800 x .902 = 722

Solution of Q.2 ( Extra Question)

(1.) As per the Provisions of Ind AS 113, Restrictions on use or sale of

Assets are considered while Fair value Measurements, but
Restriction on Entities are not considered.

In the Given Entity is not interested in development of Commercial

Project which is best use of Given land but there is no restriction on
conversion of Land.
So, Valuation of land should be made assuming it will be used for
commercial Projects.

(II.) a) If Company is using discounted Cash flow method then It is

Level III input (Unobservable).
b) If company can have an idea from quoted Prices of similar
companies in active Market then It will be classified under Level II
input.
CA-Final Financial Reporting 9
*Part3*
Question 6 : Discussed in Class
Solution Q.4
I Statement showing Valuation of
Shares by P/E Ratio

Earning per Annum, after Tax by xyz 70,000

No. of shares in xyz (Total) 5,000
Earning per share (70,000/5,000) 14
P/E Ratio (Industry) 15
Market price per share (15 x 14) 210
Discount @20% due to Transfer & 42
Marketability Restrictions
Net Market price per share (210-42) 168
No. of shares held by ABC 250
Valuation of shares (168 x 250) 42,000
60x

II Calculation of Intrinsic value

Per share
Net Assets of xyz 8,50,000
No of shares in xyz 5,000
I.V. per share (8,50,000/5,000) 170
Valuation of 250 shares held 42,500
By ABC in xyz (250 x 170)
* Imp
Solution Q.3 ( 6-8 Marks)
Calculation of Fair value of
Decommissioning Liab.
Estimation of Labour cost :
i. 100 x 25% = 25
ii. 125 x 50% = 62.50
iii. 175 x 25% = 43.75 131.25
Estimation of overhead Cost (131.25 x80%) 105
@80% of Labour cost
Labour + OH 236.25
CA-Final Financial Reporting 10

Expected Profit @20% by Market Participant 47.25

Total Estimated cost 283.50

Inflation adjustment @4% p.a

for 10years 136.15
283.50 x 148.024 - 283.50
100

Total E. cost 419.65

including Inflation
Add : Risk premium @5% for 20.98
Price Diff.
Gross Liab. 440.64
Discount factor @8.5% for 10th year 1 10 .442
1.085
Fair value of DC 194.76

Question 5,7 : Homework

Thank You
Best of Luck…..!!!!!!
CA. Parveen Jindal
CA-Final Financial Reporting 11

Chapter 2- Ind AS : 10
Events after B/S Date

*Part 1*

As per the Provisions of Ind AS-10, Events after B/S date, but
before Approval on Financial Statements by BOD can be classified under
2 different headings as follows :-
I. Adjustment Events
II. Non Adjusting Events

Adjusting Events :- If any Event was in the knowledge of Entity at

‘’B/S date’’ (i.e., Conditions for Event were Existed at B/S
date) then such an Event will be considered as an adjusting
even if It has occurred after B/S date. It means that we
can adjust it in Financial Statements of Previous year and
Back date adjustment is allowed. It can also be said that It
will be assumed that Event has taken Place at B/S date even
if It has taken Place in Next year. The following Examples
may be considered under Adjusting Events :-

(i) If Provision has been created for March Expenses but Actual Bills
are received in April then. we can replace Provision for Expenses
with Actual Bills.
(i.e., Electricity Bills, Telephone Bills, Water Bills etc.)

(ii) If Valuation of Stock has been at cost at B/S date, but its NRV falls
after B/S date but before Approval by BOD then we can value the
inventory on ‘’Fallen NRV’’

(iii) If Any court case is Pending at B/S date, but Its results come
after B/S date then results can be incorporated in Previous year
Financial Statements whether results are Favourable or Unfavourable
CA-Final Financial Reporting 12

(iv) If Insolvency of any customer is confirmed after B/S date for

which PFOD has already been created by the Entity at B/S date then we
can replace PFDD with Actual Bad debts.

(v) If any Fraud is detected in Period after B/S date, but Fraud is
related with Previous Financial year then It can also be adjusted in the
Financial Statements of Previous year.

(vi) If Any Asset is acquired before B/S date, but Its invoice is
received after B/S date then Acquisition of Asset and its Payables can
be shown in Previous Financial Year assuming an old Transaction.

Non Adjusting Events : If any Event was not in knowledge of Entity at

B/S date (i.e., conditions were not Existed
regarding any Event at B/S date) then It
should be considered as a Non Adjusting Event.
It will be considered as a New Event and It will
be adjusted in current year’ Financial
Statement. It means that No Back date
Adjustment is allowed for these Items. The
following Examples may be considered :-

(i) Abnormal Losses (i.e., Loss by Fire, Loss by Flood etc.)

(ii) Business Combination that takes after B/S date
(iii) Announcement after B/S date regarding Discounting operations
(iv) Declaration after B/S date regarding An Asset or Disposal Group
as Held for sale
(v) Changes in Tax Rates and Foreign Currency Rates after B/S date
(vi) Changes in Guarantees after B/S date

Important Note
As per the Provisions, Disclosure of Non Adjustment Events can be
Given in Director’ Report only if these Events are Significant in nature
CA-Final Financial Reporting 13

Various Other Issues

Issue I : Adjustment of Proposed Dividend by BOD

If Any Dividend is Proposed by Directors/BOD after B/S date,

but before Approval on Statements then It will be considered as a Non
Adjustment Event. It means that P.D. can not be taken as a Liability
because It can be cancelled in AGM.

Note : These days, Companies Account for Declared dividend only which is
Approved by Shareholders in AGM.

Issue II : Going Concern

The Break up of Adjustment and Non Adjusting Events will

be relevant only if Going concern assumption still Prevails for the
Entity
In case Going concern assumption fails due to any
Event after B/S date then Entity will Prepare its Financial Statements
by Consolidating the while Period still the date of Liquidation of
Company. It means that Previous Financial year and Current Financial
year will be reported as a Single Set.

Issue III : Meaning of Governing Body

As per the Provisions, Governing Body in a Company is

always assumed its BOD.

*Part 2*

Q. 1 (Adjusting Event) (Pending court case)

As per the Provisions of Ind AS 10, Events occurred after B/S
date can be adjusted in the Financial Statements of Previous year only
if conditions related with these Events were Existed at B/S date in
Previous year.
CA-Final Financial Reporting 14

In the Given case, Court Case is going on in the year

x1-x2 which indicates that conditions regarding court case were Existed
as at 31.3.x2. The court rejects Company’ claim of Tax Exemption after
B/S date on 15.4.x2 in Next Financial year x2-x3

Conclusion : On the basis of Given Explanation as in above, It can be said

that the Specified Event should be considered as an
adjusting Event because court case was going on at B/s
date. So the company should create a Provision for
Additional Tax which is Expected to be Paid as per court
decision.

Assumption: We have assumed that BOD has Given Approval on Financial

Statement after 15.4.x2.

Q.2 *Imp (Adjusting) (NRV declines after B/S date)

As per the Provisions, An Entity can adjust all Events which occur
after B/S date, but before Approval Date on Financial Statement by
BOD if conditions for such Events Exist at B/S date in Previous
Financial year.
In the Given case, Company has closing Stock of 100 cars
at B/S date. At B/S date, there is no decline in value of cars, but after
B/S date, NRV comes down by 100000 Per Unit. The Company has Closing
Stock at B/S date which indicates that company has to face Loss on C.
Stock in Next Financial year.

Conclusion : The decline in NRV should be considered as an Adjusting

Event. The Company should Provide for decline in value of
Stock at B/S date @ 1,00,000 Per Unit for 100 cars.

Q. 3 (Adjusting) (Purchase of PPE before B/S date but Invoice Later)

In the Given case, Machinery has been installed by the vender

and It is Ready for use at B/S date which indicates that Purchase of
Machinery should be capitalised in the year x1-x2 even though Actual Bill
CA-Final Financial Reporting 15

for such Purchase is received in Next year.

It means that Specified Event is an adjusting Event and
the Entity should capitalise cost of Machine and record Payables in
Previous year x1-x2 instead of x2-x3

Q. 4 (Non Adjusting : Proposed Dividend)

Solution : We can not recognise Proposed Dividend as a Liab. as at 31.3.x2

because Proposed dividend car be cancelled or reduced in AGM
which will be called after Approval Date.

Q. 5 (Identification of Approval Date)

Q. 6 (Ind AS 34 : IFR mixed with Ind AS 10)
Q. 7 (Detection of Fraud)
Q. 8 : Homework (Pending Court Case) (Q1 Repeated)
Q. 9 *Imp (Insolvency of customers) case-I Adjust
Q. 10 (Going concern Assumption) case-II Non-Adjust
Q. 11 (Fire : Non Adjusting) Discussed
Q. 12 (Dividend on Redeemable PSC) in class
Q. 13 *Imp (Should be Revised)
Q. 17 : Homework (Fraud)
Q. 18 : Homework (Fraud)
Q. 22 : Homework
Q. 25: Homework ( IFR)
Q 26 : Homework
Q. 27 : Homework (Valuation of SL)
*Part 3*

Q. 14 *Imp (Favourable Pending court case) (Adjusting)

Q. 15 *Imp (Non Adjusting : Duty Drawback)
Q. 16 (Adjusting Event : Discount) (Discussed
Q. 24 : Homework (Same as Q.16) in class)
Q. 19:
Q. . 21 (Repeated Q. 19)
Q. 23 (Adjusting Event) (Ind AS 37 & Ind AS 10)
Q: 29
CA-Final Financial Reporting 16
Repeat : Q5
(i) In the Instant case, Approval Date should be the date at which BOD
has given their Final Approval on Financial Statements and It is done
on 26.6.2022. The other dates are not relevant.

(II) In the Instant case, Company should recognise it as an adjusting

Event for the B/S date 31.3.x3 because Pending court was Existed on
B/S date. The court has rejected Exemption before Approval date of
Financial Statements for x2-x3. So the company should recognise a
Liabilities as at 31.3.x3. for Payable Tax on disallowed Exemption. No
Adjustment can be made in Earlier Financial Statements which are
already Approved.

(iii) Refer Q. 9 (Repeated)

*Imp
(iv) In the Given case, the Entity should report its Investment at
B/S date at Rs.35 Lacs. The Company should not consider Post B/S
date decline in value of Investments become Valuation of
Investment is always made at B/S date and Post changes can not be
incorporated. So, the value of 20Lacs is a Non Adjusting Event.

(v) The Purchase of Land can not be recognised in Current year

because Purchase of Asset has not taken Place in Current year The
Negotiation has been done in April which is after B/S date. So,
Purchase of Land should be recorded in F.Y. 2023-24. It means that
Purchase of Land is Non Adjusting Event for 20x2-x3.

Q. 20 *Imp

I. Application of Ind AS 102 as at 31.3.x4

In the Given case, Company has reported same Liab. for SAR in Current
year which was reported as at 31.3.x3. It indicates that Company has not
applied Provision of Ind AS 102 in Appropriate manner. The company
should have booked Additional Liab. in x3-x4 as follows :-
CA-Final Financial Reporting 17

Additional Liab. for x3-x4 = 10millions x 8 – 10m x 6 x 1 = 50million

Shares 2

Application of Ind AS 10 after B/S date

The company has made Payment of 90 millions (10mx9) on 1.5.x4 for

SAR after B/S date. There will be an Additional Liab. of 10 million (90-80)
at the time of Payment which should be recorded in x4-x5 itself because
It is a Non Adjusting Event. The Period after vesting date till
Exercise date is recognised as Exercise Period and Ind AS 102 Prefers
Accounting for SBP on Prospectively Basis. No Back date Adjustment is
allowed.

Thank You 😊
Best of Luck…..!!!!!!
CA. Parveen Jindal
CA-Final Financial Reporting 18

Chapter -3 Ind AS 1
Presentation of Financial Statements

*Part 1*

Coverage

A. B. C. *Imp
Roadmap of Applicability Guidance on Schedule Additional concepts
of Ind AS III Division II on Financial
Statements
Already Done Already Done

Additional Concepts on Financial Statements :-

As per the Provisions of Ind AS 1, Financial Statements of an

Ind-AS Compliance Entity should include the following features :-

I. Going Concern : An Entity should Prepare its Financial Statements

on the basis of Going Concern Assumption. It
means that Entity will not Liquidate its Business
in Near future. If Entity has an intention to
Liquidate its business in Near Future then facts
should be disclosed.

II. Accrual Basis : An Entity should Prepare its Financial

Statements on Accrual Basis. It means that
Actual cash flow for Incomes or Expenses does
not matter.

III. Consistency : An Entity should Prepare its Financial Statements

on the basis of Consistent Accounting Policies for
all the Period.
CA-Final Financial Reporting 19

[Note : Change in Policy is allowed under the

Guidance of Ind AS 8]

IV. off Set : An Entity should disclose its Incomes and Expenses/
Assets and Liab. Separately in Financial Statements.
It means that the Entity should not net off incomes
against Exp. or Assets against Liab.
Note : Items Can be Net off only if Provisions of Ind AS
allow for the same i.e., Trade Discount can be
adjusted against Sales or Purchase Price

V. Declaration : An Explicit and Unreserved Statement should be Given

by the Management in Financial Statements that It has
applied all IND AS.
This Statement is mandatory whether Auditor has
qualified Financial Statements or Not.

VI. Comparatives : The Financial Statements for current year should

always be Presented with its comparatives i.e.,
with Financial Statements of Previous year.

Important Notes on 3rd B/S concept

B/S : C.Y
Comparatives B/S : P.Y
B/S : In the Beginning of P.Y

If any Accounting Policy is changed and its retrospective

Effect is on Earlier Periods than Previous Financial year then
Accumulated Retrospective Effect will be adjusted in opening B/S
of the Comparative Period through Retained Earnings.

Q. 1
Q. 3 (off set) Discussed in
Q. 6 (Operating cycle) class
Q. 5 [Classification of Current/Non Current Assets]
CA-Final Financial Reporting 20

Q. 4 (Classification of CA/NCA)
Q. 7 (Different OC for Different Business)
Q. 10 *Imp (May 23 Exams : 5 Marks)
Q. 36 : Homework (Repeated question : 10) Discussed in
Before Event class
Q. 11 *V.V. Imp (Breach of Contract) After Event
Q. 13 (3rd B/S)
Q. 14
Q. 15 Repeated
Q. 18 *Imp
Q. 26, 28, 30, 33, 34 : Homework

*Part 2*

Q. 19 *Imp

(i) The Entity should Provide an Explicit and Unreserved Statement in

its Financial Statements that It has applied all Ind AS despite of
the fact that Auditor has qualified Financial Statements.

(ii) No, the Entity does not need to Add ‘’Stand Alone’’ word with each
component of Financial Statements, but the Entity should
mention in Notes to A/c’s that Company has Prepared its Financial
Statements on Stand Alone Basis.

(iii) Yes, The Entity has to disclose its Functional currency and
Presentation currency as ‘’Rs’’ as per the requirements of Ind AS
21.

(iv) Yes, The Entity can Present its Financial Statements in absolute
Amounts because Rounding off is allowed under Schedule III.

(v) No, Company cannot Remove 4 Related Parties from Current year’
related Party Disclosures due to Comparison Purpose with Previous
year’s Report whether Transaction has undertaken or not with
these Parties.
CA-Final Financial Reporting 21

Q. 20 *Imp (New Learnings)

(i) Yes, the Company can Provide additional comparatives whether it is

SOPL/B/S/Cash Flows/SOCE because two sets of Financial
Statements (C.Y & P.Y) are the minimum requirements.

(ii) Yes, the additional comparatives should be as per Ind AS Rules.

(iii) Yes, the additional comparative of SOPL can be Provided without

Giving B/S/cash flow/SOCE because Additional Comparatives can be
Provided Selectively. It means that full set of Additional
comparatives is not required.

Q. 21 (Ind AS-8)

(i) No, there is no need to Present 3rd B/S in the beginning of

Comparative year because mistake in Financial Statement does not
have any impact on Earlier years Statements. It has impact on
Comparative Financial Statements only.

(ii) No, The Management is totally incorrect because mistakes in

Financial Statements of x1-x2 can not be rectified in x2-x3 on
Prospectively basis. As per the Provisions of Ind AS 8, Restated
Financial Statements for x1-x2 should be Presented after
rectification of mistakes. It means that Rectification of Prior
Period Items will be made on retrospectively basis.

Q. 22 *Imp (SM)

(i) Yes, It is correct because Company is Expecting collection within

the Period of operating cycle. The Collective Period is 15 months,
but operating cycle is of 18 months. So, Trade Receivable can be
disclosed as current Asset.

(ii) No, the Company’s opinion on disclosure of Trade Payable under

Non current Liabilities is totally incorrect. The Amt. Payable to
CA-Final Financial Reporting 22

Trade creditor will become due within 14 months which is within the
Period of operating cycle of 18 months. So, Trade Payables should
be disclosed as a current Liab. The Company has no Unconditional
right to defer the Payment.

(iii) No, the Amount of Security Deposit can not be shown as a

Current Asset. The Deposit is Expected to be refunded by
customer after 24 months (18m + 6m) which is beyond the Period
of operating cycle. So, It should be classified as a Non Current
Assets.

(iv) No, the Accepted deposits are not Non current, but these
deposits should be classified as current Liab. because completion
time is 18 months and OC is also 18 months. So, Repayable time is
not beyond operating cycle. In addition, It has a feature of
immediate Payment as well which also indicates that it is current
in nature.

Q. 23 (off set)
Q. 16 *Imp
Q. 17 : (Ind AS 1 & Ind AS 10) Discussed in class
Q. 8
Q. 9, 25, 29 : Homework

*Part 3*

Q. 24

Balance sheet (Corrected)

Name of company : Abraham Ltd.

B/S as at :________
CA-Final Financial Reporting 23

Assets Notes Rs
Non-current Assets :-
(i) Property, Plant & Equipment - 5,000
(ii) Deferred Tax Assets (Net) Refer Comments 300
(i)

Current Assets :
(i) Inventory Refer Comments 1,200
(ii) Financial Assets : (ii)
a) Trade Receivable 1 1,100
b) Cash & CE - 2,000
c) other Financial Assets Refer Comments 300
(iii)

Total (A) 9,900

Equity & Liabilities

A. Equity :
i) Share capital 2 1,000
ii) Other Equity 3 2,000

B. Non currency Liabilities :

(i) Financial Liab.
Borrowings 4 5,000

C. Current Liabilities :
(1) Financial Liabilities
Trade Payable - 300
Other F. Liab. 5 710
(2) Other current Liab. 6 190
(3) Short Term Provisions 7 700

Total (B) 9,900

CA-Final Financial Reporting 24

Comments on Errors & Misstatements :

(i) As per the Provisions of Ind AS 12, the Entity should report Net
Deferred Tax in B/S (DTL-DTA). In the Given case, company has
reported DTL & DTA separately which is completely wrong. It should
have reported Net Deferred Tax as follows :-
Deferred Tax Assets 700
Deferred Tax Liab. (400)
Net DTA 300

(ii) As per the Provisions of Ind AS 2, valuation of stock should be

made at cost or NRV whichever is Lower. In the Given question,
company has valued its stock at cost of 1500 but NRV is 1200 which
indicates that wrong valuation has been done. The closing stock
should be reduced by 300 (1500-1200) and the Loss on valuation
should be transferred to P&L A/c.

(iii) In the Given case, company has not recorded an Accrued Int. of
300 in its income. So, we should record it under the heading of
other Income in SOPL and other Financial Assets under C. Assets.

(iv) The heading of other Equity has been mis-stated as R&S. It

required a correction in the name of heading.

(v) The company has disclosed a Provision for Loss under the heading
of other Equity which is also a wrong Presentation. We will disclose
is under Short Term Provisions because It will become due next 6
months.

(vi) The Company has included an Accrued Int. of 700 Lacs in Term
Loan which is also a mistake because Int. Accrued on Loan will be
disclosed under other Financial Liab./Current Liab.

(vii) The Company has disclosed Unclaimed Dividend as an other

current Liab., but It should be reported under other financial Liab.
It also required a Correction.
CA-Final Financial Reporting 25

Notes to A/c’s :

1. Trade Receivable :
Considered Goods (6m) 1065
Considered Doubtful (1Y) 40
PFDD (5) 35
Total 1100

2. Share Capital :
Equity share capital (100 Lacs of 10 each) 1,000
Total 1000

3. Other Equity :
Total of other Equity as per Given B/S 2400
Provision for Loss in a Service Contract (400)
2000

4. Long Term Borrowings :

Borrowings (Given) 5700
Interest Accrued (700)
5000

5. Other Financial Liab. (CL) :

Interest Accrued on Borrowings 700
Unpaid dividends 10
710

6. Other Current Liab.

O.C. Liab. as per Given B/S 200
Unclaimed dividends (10)
190

7. Short Term Provision :

As per Given B/S 300
Prov. For Loss 400
700
CA-Final Financial Reporting 26

Statement of P&L (Correct)

Name of company : Abraham Ltd.

Period Ending :________

Particular Notes Rs
Revenues :
i) Revenue from operation - 6,000
ii) Other Income (Accrued Int.) - 300
Total (A) 6,300

Expenses :
i) Operating Cost - 3199
ii) Employees cost - 1200
iii) Depreciation - 450
iv) other Exp. (Valuation Loss) - 300
Total (B) 5149

PBT (A-B) 1151

Tax Exp. (201)
PAT 950

Q. 27 (Rectification of FS)

Balance sheet (Correct)

Name of company : Soft Bharti Pvt Ltd.

Period as at : 31.3.2020

Assets Notes Rs
A. Non current Assets :-
(i) Property, Plant & Equipment - 1,00,000
(ii) Financial Assets :
Long Term Loan - 40,000
(iii) Deferred Tax Assets - -
(iv) Other Non current Assets - 50,000
CA-Final Financial Reporting 27

B. Current Assets :
(i) Inventory - 80,000
(ii) Financial Assets :
a) Investments (Fair value) - 50,000
b) Trade Receivables - 55,000
c) Cash & C.E. - 1,15,000
d) Other Financial Assets - 51,000

Total (A) 5,41,000

Equity & Liabilities :

A. Equity :
a) Share capital - 1,00,000
b) Other Equity (Refer SOPL) 245,200

B. Non current Liabilities :

(1) Financial Liab. - -
(2) Long Term Prov. 2 24,000
(3) Deferred Tax Liab. 1 5,100

C. Current Liabilities :
(1) Financial Liab. :
a) Trade Payable - 11,000
(2) Other current Liab. 3 30,000
(3) Current Tax Liab. - 1,25,700

Total (B) 54,10,000

Statement of Profits & Loss

Name of Company : Soft Bharti Pvt Ltd.

Period : 19-20
CA-Final Financial Reporting 28
__________________________________________________________________
Revenues :
a) Revenue from operations - 10,00,000
b) other Income 4 120,000

Total (A) 11,20,000

Expenses :
(a) Purchase of Stock - 500,000
(b) Change in Stock - (50,000)
(c) Emp. cost - 1,75,000
(d) Depreciation - 30,000
(e) Other Exp. - 90,000
Total (B) 7,45,000

(a-b) PBT 3,75,000

Tax Exp. : C. Tax (1,25,700)
D.T. Liab. (4,800)
PAT 2,44,500

OCI (1000-300) 700

T.C. Income 2,45,200

Notes to A/c’s :

1. Deferred Tax :
Deferred Tax Liab. as per Given B/S 6,000 (DTL)
Deferred Tax Assets on Preliminary Exp. 7,200 (DTA)
Tax Base (30000 – 1) 24000
5
A/c Base 0__
T. Diff. 24000

TR 30%
DTA 7200
CA-Final Financial Reporting 29

Deferred Tax Liab. on Investments : 6,000 (DTL)

Tax Base (cost) 30,000
A/c’s Base (FV) 50,000
T. Diff. 20,000
TR 30%
DTL 6000

Deferred Tax Liab. on Actuarial Gain on Plan Assets 300 DTL

(1000 x 30%) Total 5100 DTL

4800 300
PL OCI

2. Long Term Provisions :

As per B/S Given (PVDBO) 25,000
Actuarial Gain (1,000)
Correct figure 24,000

3. Other current Liab. :

As per Given B/S 45,000
Cancellation of Proposed Dividend (15,000)
30,000

4. Other Incomes:
As per Given PL 1,00,000
F.V. Gain on Invest. 20,000
120,000

Q. 12 : Homework

*Part 4*

Q. 35 : Discussed in class
CA-Final Financial Reporting 30

Q. 32

As per the Provisions of Ind AS-1, Item is material if Omitting,

Misstating or Obscuring of it can effect the decisions of Primary of
Financial Statements, but an Exceptional Item is an ordinary item
which has low Frequency during ordinary course of Business as per the
requirements of Schedule III Division II. The disclosure of
Exceptional Items is mandatory on the face of P&L as per Schedule
III Division II, but Disclosure of Material Items is a Matter of
Judgement. The Following Items may be considered as Exceptional
Items :-

(i) Valuation Loss on Inventory due to its Valuation at NRV

(ii) Impairment Loss on PPE/IA/IP due to Valuation at Recoverable
Amt.
(iii) Profit/Loss on Sale of PPE/IA/IP/ Investments
(iv) Restructuring cost (If any)
(v) Litigation Charges (If any)

Q. 31 (Applicability of Ind AS)

(1) Applicability of Ind AS on VLA :

We should not Apply Ind AS Rules 2015 on VLA because It has
been incorporated as a Partnership firm and IND AS are not Applicable
on firms. These Rules have been Framed for companies only. A
Partnership firm can not hold Assets and Liab. in its own name. So, It
can not be considered as a Separate vehicle.

(2) Applicability on SWL :

We can Apply IND AS Rules 2015 on SWL because this is an
Associate company of FVL and It has been incorporated under
Companies Act. It does not matter whether it is a Charitable Company
or Not.
CA-Final Financial Reporting 31

Q. 2 (Going concern)

In the Given case, Management should Provide a Statement that

It has Prepared its Financial Statements on Going concern Basis
because Govt. will reinstate the duty on imported Items which will help
the Entity in returning to Profitability. So, Entity has bright
chances for continuation of its existing business because It would be
able to face competition with importers after application of duty on
Imported Products.

Thank You 😊
Best of Luck…..!!!!!!
CA. Parveen Jindal
CA-Final Financial Reporting
32

Chapter 4 - Ind AS : 34
Interim Financial Reporting (IFR) *[Link]

*Part 1*

Discussion about Topic

*Part 2*

Concept 1 : Legal Status

As per the Provisions of Ind AS 34, Interim Financial Reporting is

not mandatory for the Ind AS compliance companies. In case IFR
is Prepared under any *Legal Requirement then Ind AS 34 will be
referred for Guidance.
* Legal Requirement : SEBI Requires all the Listed companies to
Prepare and Present IFR [Quarterly Reports]
due to which Ind AS 34 will become Applicable

Important Note
If any unlisted company having Net worth Exceeding 250 crore wants
to prepare IFR (Voluntary) then It will also Prepare and Present
IFR under the Guidance of Ind AS 34

Concept 2 : Forms & Content

Rule A)Form of IFR : Condensed form

Rule B)Content of IFR :
i. Condensed B/S
ii. Condensed P&L
iii. Condensed CFS
iv. Condensed SOCE
v. Condensed Notes to A/Cs
CA-Final Financial Reporting
33

c)Disclosures Format :
a) B/s : Quarter wise separately with comparatives
b) P&L : i) Quarter wise separately with comparatives
ii) Cumulative year to date with comparative
c) Cash flow : Cumulative year to date with comparatives
(Quarter wise Not required)
d) SOCE : Cumulative year to date with comparatives
(Quarter wise Not required)
Concept 3 : Rules for IFR

Rule 1 : Accounting Policies

As per Provisions, Accounting Policies shall remain same while
Preparing IFR which are Followed by the Entity For Annual Reporting.
It means that change in Accounting Policies is not allowed
for the Quarterly Reports.

Rule 2 : Revenues (Seasonally, Cyclically, Occasionally)

As per the Provisions, the Entity can not allocate Revenue of Qtr
Over other Qtrs. In case of seasonal Business, Revenue of any Qtr
can arise Exceptionally in compare to other Qtrs. In such case,
Revenue will be reported in Respective Qtr only and It can not be
allowed over other Qtrs. It can also be said that Revenue shall be
Reported on Respectively Basis.

Rule 3 : Expenses :
The Entity should also record Expenses on Respectively Basis. It
Means that Deferrment of Expenses of one Qtr into other Otr is not
is not allowed. The Expenses will be charged in the quarter to which it
belongs/ in which it is incurred. However, Provisions can be made at
the end of each Qtr for Expected Losses or Expenses [Legal or
Constructive obligation i.e., warranty court case etc.]

Rule 4 : Income Tax Expenses :

- Refer 3rd Lecture on WATR – As Per message given by
AS-25 Jindal sir in 1st lecture.
CA-Final Financial Reporting
34

Rule 5 : Dividend Paid in Any Qtr:

If any Dividend is paid in any Qtr then Gross paid Amount
and Per share Dividend will be reported in Notes to A/cs.

Rule 6 : Material & Significant Disclosure (Notes to A/cs)

i. If Inventories have been written down to NRV or Reversals of
Valuation Loss
ii. Impairment Loss written off or Reversed
iii. Acquisition or Disposal of PPE/IA/IP/Invest.
iv. Any Loan default or Breach of contract
v. Related Party Transactions
vi. Change in Contingent Liab. & Contingent Assets
vii. Any other Disclosure which can improve Presentation of IFR

Rule 7 : Other Disclosures :-

i. The Entity should declare in IFR that It has followed same

Accounting policies while preparing IFR which are designed for
Annual reporting.
ii. Buy Back of Securities (if any)
iii. Operating Segment Report should also be Prepared
iv. The Entity should also declare that It has not deferred any
Revenue or Exp.
*Part 3*

Guidance Note on Calculation of Tax in Interim Financial Reporting

As per the Provisions of Guidance Note Calculation of Income Tax for
the Purpose of IFR should be based on “Weighted Avg. Tax Rate”
instead of Actual Tax for respective Qtr. This concept is based on
Accrual concept which Explains the allocation of Annual Exp. & Incomes
over the period of 12 months. The following Equation may be
considered for the computation of “WATR” :-
CA-Final Financial Reporting
35
WATR = Annual Estimated Tax
Annual Estimated Income
E.g.
i. Annual Income (Estimated) : 400,000
ii. Qtr. wise : I 150,000
II 50,000
III 100,000
IV 100,000

iii. Tax : First 2L = 20%

Net Bal. = 30%
Calculate Qtr. wise Tax.

Solution:

I. Calculation of WATR
a) Total Annual Income (Est.) : 400,000
b) Total Annual Tax (Est.) :
First 2 L @ 20% 40,000
Next 2 L @ 30% 60,000
100,000
c) WATR = 100,000 x 100 = 25%
400,000

II. Calculation of Qtr. Wise tax

I II III IV
Est. Income 150,000 50,000 100,000 100,000
WATR @ 25% 37,500 12,500 25,000 25,000

Note on Capital Gain Tax

As per the Provisions of Guidance Note, WATR should not include
Capital Gain Taxes because these Taxes are calculated on Specific
Transactions. It can also be said that these Taxes can be dealt on
respectively/ Actual Basis.
CA-Final Financial Reporting
36
E.g.
i. Estimated Annual Income : 400,000
(Including 20,000 capital Gain in 3rd Qtr)
ii. Qtr. wise : I 120,000
II 60,000
III 120,000 (including C.G)
IV 100,000
iii. Tax on Capital Gain @ 20%

iv. Normal Tax : First 1L = 10%

Next 1L = 20%
Bal. = 30%
Calculate Taxes for IFR.

Solution : Calculation of WATR

a) Annual Estimated Income (4L -0.2L) 380,000

(other than C. Gain)

b) Annual Estimated Taxes :

First 1L @ 10% 10,000
Next 1L @ 20% 20,000
Bal 1.8L @ 30% 54000
3.8L 84000

c) WATR = 84,000 x 100 = 22.11%

380,000

Calculation of Qtr Wise Tax

Q1 = 120,000 x 22.11% = 26532
Q2 = 60,000 x 22.11% = 13266
Q3 = (20,000 x 20%) + (100,000 x 22.11%) =26110

C.G Normal
Q4 = 100,000 x 22.11% = 22110
CA-Final Financial Reporting
37
Solution of Q.1

Calculation of WATR

WATR = (40,000 x 30%) + (60,000 x 40%) x 100

100,000
= 36%

Calculation of Qtr. Wise Tax

Q1 Q2 Q3 Q4
Est. Income 25,000 25,000 25,000 25,000
Tax @ 36% 9000 9000 9000 9000

Solution of Q.2

Calculation of WATR

WATR = (40,000 x 30%) + (40,000 x 40%) x 100

80,000
= 12000 + 16000 x 100
80,000
= 35%

Calculation of Qtr. Wise Tax

C.G. Tax
Q1 = 25000 x 35% = 8750
Q2 = (20,000 x 10%) + (5000 x 35%) = 3750
Q3 = 25000 x 35% = 8750
Q4 = 25000 x 35% = 8750
CA-Final Financial Reporting
38
*Part 4*

Solution of Q.5 *Imp

Statement showing Results for Ist Qtr ending on 31.3.2020

Sales 50 Crores
Expenses : Salaries 30 Crores
Advert. 2 Crores
Adm. & Selling Exp. 8 Crores (40 Crores)
Profits 10 Crores

Comments : As per the Provisions of Ind AS 34, An Entity cannot

defer Its Incomes or Expenses. In the Given case,
Company wants to defer Expenses of Rs.21 crores without
any reason which is not allowed. So, the company’s Point of
view to defer its Expenses is not correct and all Expenses
shall be charged in Q1 itself.

Solution of Q.8 *Imp

Calculation of Correct Income

Profits (Given) 720,000

Bad debts (deferment is not allowed) (20,000) (40,000 x 50%)
Correct Income 700,0000

Comments :
1) In the Given case, we have ignored any adjustment relating to
Extra-ordinary Loss because there is no concept of Extra-ordinary
Items under Ind AS Rules. The Loss of Rs.35,000 is to be charged in
Q.3 which is correctly recorded.
2) In the Given case, Adjustment of Rs.45000 is also correct because
change in method of Depreciation is treated as change in
Estimation which is considered Prospectively.
CA-Final Financial Reporting
39
Solution of Q.2 (Study Material) Discussed in Class
Solution of Q.3 (*Imp), Q.6 Discussed in Class
Solution of Q.9

As per the Provisions of Ind AS 34, All Incomes & Expenses should be
recorded in the Period in which these are incurred or earned. We
cannot defer any Income or Expense.
In the given case, Dividend Income of Rs.100 crores has been received
by the Entity in 3rd Qtr. which should be recognised in 3rd Qtr.
Conclusion : On the basis of above discussion, It can be said that
company Point of view of recognising Income of 25 crores in each Qtr.
is not correct.

Solution of Q.10 *Imp

In the Given case, Company overall Profit is ‘Zero’, but we cannot
avoid Tax calculations because we are Preparing Quarterly Reports. So,
Calculation of Tax should Be made on the basis of Qtrly Profits or
Losses as follows :-

Statement showing Qtrly Taxes

Q1 Q2 Q3 Q4 Total
Profits 150 (50) (50) (50) NIL
Tax Rate 35% 35% 35% 35% 35%
Tax Liab.(Saving) 52.5 (17.5) (17.5) (17.5) 0

Solution of Q.11 *[Link] ( RTP Nov 20)

In the Given question, Accounting year is 1.10.2019 – 30.9.2020, but Tax

Laws are based On Normal Financial year (Apr - march). So, Different
Tax Rates can be applied in Different Financial years as per Tax Laws.
We will Compute Tax Exp. for IFR on Actual basis as follows :-
Q1 Q2 Q3 Q4
PBT 200 200 200 200
Tax Rate 20% 20% 30% 30%
Taxes 40 40 60 60
CA-Final Financial Reporting
40

Solution of Q.4 Homework

Solution of Q.7

Calculation of Qtrly Income

Net Income (Given) 102,000

i. Extra-ordinary Income (20,000)
(Related to Second Qtr, but Deferred in 3rd Qtr)
ii. Change in Inventory valuation 10,000
(related to Earlier Qtrs)
Correct Income 92000

Comments : The Entity should re-state IFR for Earlier Periods due to
deferment of Extra- ordinary Gain & Change in Accounting
Policy.

*Part 5*

Solution of Q.12 ( Change in Estimation)

Adjustments relating to Fixed OH in IFR

A. Basic Information : QI QII QIII QIV

A. Fixed OH per Qtr. 2500 2500 2500 2500

B. Recovery Rate per unit 5/- 5/- 5/- 5/-
(2500/ 500 Units)
C. Actual Output (units) 400 600 500 400
D. Normal Output 500 500 500 500

B. Adjustment in Ist Qtr.

i. Fixed OH in Ist Qtr. Rs.2500
Recovered OH in Ist Qtr (400 x5) (Rs.2000)
Under- Recovery Rs.500
CA-Final Financial Reporting
41

ii. As per the provisions of Ind AS-2, Unabsorbed Fixed OH shall be

written off in SOPL due to which we will debit Rs.500 in Qtrly P&L
as Unabsorbed Expenses.

C. Adjustments in 2nd Qtr :-

As per the Provisions of Ind AS 34, Qtrly Reports should reflect

Annual Results, So we may need to adjust change in Estimations on
Prospectively basis. In Second Qtr, we should compute cumulative
figures in relation to Fixed OH as follows :-

Cumulative Fixed OH (Ist Qtr. + IInd Qtr.) Rs.5000

Cumulative Recovered OH (1000 x 5) ( Rs.5000)
Under- Recovery NIL

Comments : As per cumulative figures, there is no under Recovery till

2nd Qtr. due to Which we should have to Reverse 500 in PL
of 2nd Qtr. which was charged in Ist Qtr as a result of
change in Estimation.

D. Adjustment in 3rd Qtr

Cumulative [Link] for 3 Qtrs. Rs.7500

Recovered OH on Actual Production (Rs.7500) (1500 x 5)
Diff NIL
* There will be no adjustment relating to under Recovery in 3rd Qtr.

E. Adjustment in 4th Qtr

Cumulative [Link] for 4 Qtrs 10,000

Recovered OH (1900 x 5) (9500)
Under Recovered 500
CA-Final Financial Reporting
42

Comments : We will charge under Recovery of Rs.500 in statement of

P&L.

Question 13,14,15,16: Homework

Thank You 😊
Best of Luck…..!!!!!!
CA. Parveen Jindal
CA-Final Financial Reporting 43

Chapter -5 Ind AS : 7
Cash Flow Statements (CFS)

*Part 1*

Concept 1 : Meaning & Presentation of CFS

As per the Provisions of Ind AS-7, Cash flow statement is the

summary of Cash & Bank Balances. It is Prepared to disclose the
Position of Cash Balance during the year. It is Prepared under the 3
headings as follows :-

Classification

CFS

Cash from Operating Cash from Investing Cash from Financing

Activities Activities Activities

Direct Method Indirect Method

Concept 2 : Explanation of C.F. Activities

(i) C.F.F.A (Financing Activities)

As per the Provisions of Ind AS-7, Cash from Financing Activities

should include all transactions in C&B A/c which are related with Share
capital & Loans. The Following Transactions may be considered under
this heading :-
Long Term Short Term
CA-Final Financial Reporting 44

i. Issue of Shares/ Debentures

ii. Redemption or Buy Back of Shares/ Debentures
iii. Receiving/ Repayment of Loans
iv. Interest/ Dividend Paid
v. C.D. Tax Paid
vi. Proceeds from Calls in Arrear
vii. Premium on Issue/ Redemption/ Buy Back of Securities etc.

(ii) C.F.I.A (Investing)

As per the Provisions of Ind AS-7, CFIA should include all

transactions in C&B A/c which are related with Fixed Assets (TA & IA) &
Investments (LT & ST). The Following Transactions may be covered :-
i. Sale of F. Assets/ Purchase of F. Assets
ii. Sale of Investments/ Purchase of Investments
iii. Dividend Received, Interest Received, Rental Received etc
iv. Capital Gain Tax Paid etc.

(iii) CFOA (Operating Activities)

Unit I : Direct method
(Ind AS -7 Encourages this method)

As per the Provisions of Ind AS 7, All the transactions, which are

not Financing or Investing in nature, should be reported under
Operating Activities. It can also be Said that All the Transactions which
are related to nature of Business should be reported under this
heading. Under Direct Method, All transactions are taken directly from
Cash & Bank A/c as follows :-
i. Cash Sales/ Cash Purchases
ii. Collection from Debtors/ Payment to creditors
iii. Expenses paid (Salaries, Wages etc.)
iv. Tax Paid
v. Collection from B/R & B/P
vi. Interest from Customers
vii. Interest to Suppliers etc.
CA-Final Financial Reporting 45

Unit II : Indirect Method

Under Indirect method, we use P&L for reporting of CFOA. The following
format is Normally Applied :-

CFOA
Non Cash
Net Profit after Tax xxxx
Tax Expenses for Current year xxxx
PBT xxxx
C.T DTL DTA

Non Cash Items :

i. Depreciation on PPE xxxx
ii. Amortisation on I.A xxxx
iii. Loss on sale of Assets xxxx
iv. Impairment Loss written off xxxx

Non Operating Items :-

i. Interest Income (xxxx)
ii. Interest Exp. xxxx
iii. Profit on sale of Assets (xxxx)

Working Capital Adjust :-

Increase in C. Assets (xxxx)
Decrease in C. Assets xxxx
Increase in C. Liab. xxxx
Decrease in C. Liab. (xxxx) + xxxx

Tax Paid (including Advance Tax Paid) (xxxx)

CFOA xxxx
CA-Final Financial Reporting 46

Concept 3 : Other Important Points to be Considered

i. Cash & Cash Equivalents

As per the Provisions of Ind AS-7, Cash & Cash Equivalents are
the Opening & Closing Balances in CFS. These Balances may be in the form
of Cash Balance, Bank Balance & Investments which are Expected to be
realised within 90 days.
Cash Credits
*If any Bank Overdraft is repayable on Demand then It will also be
considered as a Part of Cash & Cash Equivalents. All other overdrafts
shall be disclosed under Financing Activities.

ii. Net Cash Flows

As per the Provisions of Ind AS-7, Cash flow reporting should
not be made on net Basis. All cash flows should be reported on Gross
Basis.

iii. Cash Equivalents in Foreign Currency

If any Cash Equivalent is held in Foreign currency then we will
consider it at Actual Rate instead of Closing Rate. If any Exchange
fluctuation was booked at B/S date due to change in Exchange Rate then
such difference should also be eliminated from NP.

iv. CFS for Banking & NBFC

If CFS is Prepared by Banking Co. & NBFC then Interest on Loans
& Deposits shall be considered under Operating Activities.

*Part 2*

Q. 1 , 2 , 3 , 4 Discussed in Class

Solution of Q. 5
CA-Final Financial Reporting 47

Calculation of Cash from Operating Activities by ‘’Direct Method’’

Collections from Debtors (W.N #1) 4,97,000
Payment to Suppliers (W.N #3) (3,45,000)
Payment for Expenses (W.N #4) (52,000)
Tax Paid (30,000)
CFOA 70,000

W.N #1
Debtors A/c
To Bal. b/d 7000 By Cash (Bal. fig.) 4,97,000
To Sales 5,00,000 By Bal. c/d 10,000
5,07,000 5,07,000

W.N. #2
Calculation of Purchases
X
COGS = OS + P + [Link]. - CS
3,50,000 = 13,000 + P – 12,000
P = 350000 – 13000 + 12000
P = 349,000
W.N #3
Creditors A/c
To Bank (Bal. fig) 3,45,000 By Bal. b/d 8,000
To Bal. c/d 12,000 By Purchases (W.N #2) 3,49,000
3,57,000 3,57,000

W.N #4
Expenses A/c
To Bank (Bal. fig) 52,000 By Bal. b/d 7,000
To Bal. c/d 10,000 By SOPL (Given) 55,000
62,000 62,000
CA-Final Financial Reporting 48

Calculation of CFOA by ‘’Indirect method’’

Profit before Tax 83,000
Add : i) Depreciation 7,000
ii) Loss on Sale of Assets 3,000
iii) Interest Paid 2,000

Changes in Working Capital :

i) Decrease in Stock 1000

ii) Increase in Debtors (3000)
iii) Increase in Creditors 4000
iv) Increase in Exp. 3000
Tax Paid (30,000)
CFOA 70,000

Note : We have ignored changes in Provisions because these Provisions

are not shown in Given Income Statement which indicates that
these Provisions have not been routed through SOPL by company
and its changes do not Effect NP.

Q. 6 , 7 , 9 , 10 : Discussed in class

Solution of Q.12
Cash Flow Statement
(Direct Method)

Cash From Operating Activities :-

Collection from Debtors 2800
Payment to Creditors (2000)
Overhead Exp. (200)
Payroll (100)
Tax Paid (250) 250

Cash from Investing Activities :

Purchase of FA (200)
Sale of FA 100 (100)
CA-Final Financial Reporting 49

Cash from Financing Activities

Issue of shares 300
Dividend Paid (50)
Bank Loan Repaid (300) (50)

Changes from OA + IA + FA 100

Opening Bal. 50
Closing Bal. 150

*Part 3*

Q. 11
I. Cash Flow Statement
(Direct Method)

Particular Notes ₹
Cash from Operating Activities :
Collection from Debtors 1 2,07,500
Payment to Suppliers 3 (1,24,000)
Insurance Exp. Paid 4 (9,000)
Wages Paid 5 (53,000)
CFOA (A) 21,500

Cash from Investing Activities :

Purchase of Fixed Assets (46,000)
CFIA (B) (46,000)

Cash from Financing Activities :

Dividend Paid (2,500)
Issue of Debentures 13,000
Issue of Shares 4,000
CFFA (C) 14,500
CFOA + CFIA + CFFA (10,000)
Add : Opening Balance 14,000
Closing Balance 4,000
CA-Final Financial Reporting 50

1. Debtors A/c
To Bal. b/d 32,500 By Cash (Bal. fig.) 2,07,500
To Sales 2,00,000 By Bal. c/d 25,000
2,32,500 2,32,500

2. Calculation of Purchases

COGS = O. Stock + Purchases + D. Exp - C. Stock

1,23,000 = 34000 + P – 37,000
P = 1,23,000 – 34000 + 37000
P = 126,000

3. Creditors A/c
To Bank (Bal. fig) 1,24,000 By Bal. b/d 16,000
To Bal. c/d 18,000 By Purchases (W.N #2) 1,26,000
1,42,000 1,42,000

4. Insurance Exp. A/c

To Bal. b/d 7,000 By PL (Given) 11,000
To Bank (Bal. fig) 9,000 By Bal. c/d 5,000
16,000 16,000

5. Wages A/c
To Bank (Bal. fig) 53,000 By Bal. b/d 7,000
To Bal. c/d 4,000 By PL (Given) 50,000
57,000 57,000

Cash Flow Statement

(Indirect method)

Particulars Notes ₹
Cash from Operating Activities :
Net Profit 1,000
Depreciation on PPE 15,000
CA-Final Financial Reporting 51

Working Capital Adjustments :-

Decrease in A/R 7,500
Decrease in Prepaid Insurance 2,000
Increase in Stock (3,000)
Increase in A/P 2,000
Decrease in wages (3,000) 5,500
CFOA 21,500

Cash from Investing Activities :

Purchase of PPE (46,000)
CFIA (46000)

Cash from Financing Activities :

Dividend Paid (2,500)
Debentures Issued 13,000
Shares Issued 4,000
CFFA 14,500

CFOA + CFIA + CFFA (10,000)

OB 14,000
CB 4,000

Q. 13
Cash flow Statement
(Indirect method)

Particulars Notes ₹
Cash from Operating Activities :-
Profit After Tax 4,450
Add : Current Tax 105
Profit before Tax 4,555
Depreciation on PPE 500
Amortisation of I. Asset 20
Profit on Sale of PPE (70-60) (10)
Increase in DTA (855-750) (105)
CA-Final Financial Reporting 52

Working Capital Adjustments :

Increase in ONCA (30)
Increase in OCA (110)
Decrease in ONCL (875)
Increase in Payables 60
Increase in OCL 100
Tax Paid (105)
CFOA 4,000
Cash from Investing Activities :
Sale of Machinery 70
Purchase of PPE (W.N #1) (1060)
Purchase of I. Asset (W.N. #2) (40)
NCA : Financial Asset (170-145) 25
Sale of Investments (2500-2300) 200
CFIA (805)
Cash from Financing Activities :
Dividend Paid (Interim) (450)
Long Term Borrowings (3000)
Bank overdraft 15
CCFA (3435)
CFOA + CFIA + CFFA (240)
Add : Opening Balance 460
Closing Balance 220

W.N #1 PPE A/c

To Bal b/d 12500 By Depreciation 500
To Bank (Bal. fig) 1060 By Bank (Sale) 70
To Profit on Sale (P&L) 10 By Bal. c/d 13000
13570 13570

W.N #2 I. Assets A/c

To Bal. b/d 30 By Amort. 20
To Bank (Bal. fig) 40 By Bal. c/d 50
70 70
CA-Final Financial Reporting 53

Solution of Q.14, 18 : Homework

Q. 19
Calculation of Cash from Operating Activities

Collection from Debtors (W.N. #1) 85,33,000

Payment to Creditors (W.N. #3) (55,75,000)
Fire Insurance Claim Received 1,10,000
(Exceptional)
Expenses Paid (15,40,000)
Tax Paid (W.N. #4) (1,12,000)
CFOA 14,16,000

W.N. #1 Debtors A/c

To Bal b/d 1,88,000 By Cash (Bal. fig) 85,33,000
To Sales 85,50,000 By Bal. c/d 2,05,000
8738000 8738000

W.N. #2 Calculation of Purchases

COGS = OS + P – CS
56,00,000 = 165000 + P – 120000
P = 56,00,000 – 165000 + 120000
P = 55,55,000

W.N. #3 Creditors A/c

To Bank (Bal. fig) 55,75,000 By Bal. b/d 215,000
To Bal. c/d 195,000 By Purchases (W.N. #2) 55,55,000
57,70,000 57,70,000

W.N. #4 PFT A/c

To Bank (Bal. fig) 112,000 By Bal. b/d 65,000
To Bal. c/d 48,000 By PL 95,000
160,000 160,000
CA-Final Financial Reporting 54

Q. 20 *V.V Imp

Cash Flow Statement

(Indirect Method)
Notes Rs

Cash from Operating Activities :

Profits 10,00,000
Exchange Gain on Creditors (Non cash) (10,00,000)
Exchange Gain on Loan (500000)

W.C. Adjust.
Increase in creditors 1,00,00,000
(200000 x 50) CFOA 95,00,000

Cash from Investing Activities -

Cash from Financing Activities

Increase in Borrowing 50,00,000
($100000 x 50) CFFA 50,00,000
CFOA + CFIA + CFFA 1,45,00,000
OB 200000
CB 1,47,00,000

Q. 21 (Repeated Q.14)
Q. 22, 23 : Homework
CA-Final Financial Reporting 55

*Part 4*

Q. 17 *Imp
Consolidated Cash Flow Statement

Particular Notes ₹

Cash from Operating Activities

Profit before Tax - 70,000
Depreciation - 30,000
Interest Expenses - 4,000
Working Capital Adjust. :-
Decrease in Stock (35,000+4,000-30,000) - 9,000
Decrease in Debtors (50,000+8000-54000) - 4,000
Decrease in Payables (60,000+32,000- (24,000)
68000)
Tax Paid W.N. #1 (14,000)
CFOA 79,000

Cash from Investing Activities :

Increase made in B Ltd.
(74,000 – 2,000) - (72,000)
CFIA (72,000)

Cash from Financing Activities :

Interest Paid - (4,000)
CFFA (4,000)
(CFOA + CFIA + CFFA) 3,000
Add : Opening Balance 5,000
Closing Balance 8,000

W.N. #1 Tax Payable A/c

To Bank (Bal. fig) 14,000 By Bal. b/d 11,000
To Bal. c/d 12,000 By PL (Given) 15,000
26,000 26,000
CA-Final Financial Reporting 56

W.N. #2 PPE A/c

To Bal. b/d 80,000 By Depreciation 30,000
To Business Combination 1,10,000 By Bal. c/d 1,60,000
1,90,000 1,90,000

W.N. #3 Long Term Debt A/c

To Bal. c/d 100,000 By Bal. b/d 64,000
_______ By Business Combination 36,000
100,000 100,000

Q. 15
Consolidated Cash Flow Statement

Particular Notes ₹

Cash from Operating Activities :-

Profit before Tax W.N. #1 1,920
Interest Expenses (110-10) - 100
Depreciation on PPE - 290
Profit on Sale of PPE (630-490) - (140)
Profit from Associate - (120)
Impairment of GW - 265
Impairment of IA - 900

Working Capital Adjust :

Decrease in Stock (1900 + 60 - 1550) - 410
Decrease in Debtors (1800 + 30-1250) - 580
Decrease in Creditors (3610 + 50 - 1550) - (2110)
CFOA 2095

W.N. #1 Calculation of Correct PBT

PBT (Given in Question) 1,840

Add : i) Renovation Exp. wrongly charged 30
ii) Interest cost on Q.A. wrongly charged 40
CA-Final Financial Reporting 57

iii) Interest on S.B. wrongly charged 10

1920

Q. 16 (Consolidation : Comprehensive Q. 10) (Already done)

Thank You 😊
Best of Luck…..!!!!!!
CA. Parveen Jindal
CA-Final Financial Reporting 58

Chapter 6- Ind AS 8
Accounting Policy, Errors & Estimate

*Part 1*

Coverage

Unit I: Unit II : Unit III:

Accounting Policies Estimates Errors

Unit I : Accounting Policies *Imp

As per the Provisions of Ind AS 8, Accounting Policies are

the Accounting Principles/Rules which are considered by an Entity while
Preparing Financial Statements. many Accounting Policies have been
Discussed in various Ind AS, but An Entity may require the Application
of its Judgement while Selecting Appropriate Policy.
The following Example may be considered for different Policies:-

i) Ind AS : 2 FIFO or weighted Avg. for stock valuation

ii) Ind AS : 16 Cost model or Revaluation model for Measurement of
PPE
iii) Ind AS 109 Fair value changes in Equity Investments through FVPL
or FVOCI model
iv) Ind AS 7 CFS by Direct method or Indirect method

In addition to above discussion, An Accounting Policy should have the

following features:-
A. It should be Prudent
B. It should be Reliable
C. It should be Transparent
D. It should be on Substance over form Basis
E. It should be Neutral
CA-Final Financial Reporting 59

Important Discussion on Rule of Policy on Consistent Basis

In addition to Basis Features, Application of An Accounting Policy

should be made on ‘’Consistent Basis’’ after its selection It means that
change in Selected Policies is not allowed.

Exception

An Entity can change its Accounting Policies only if it is required

by any New Ind AS or It is required to improve the Presentation of
Financial Statements. In case change in Policy takes place then
Adjustments in Financial Statements shall be made with ‘’Retrospective
Effects’’ as follows :-

Step I : Calculate Total Accounting Effects by ‘’Existing Policy’’ from

the date of its “ First Application till Beginning of the
Comparative Financial year”
Step II : Calculate Total Accounting Effects by ‘’New Policy’’ for the
same Period as Noted in ‘’Step I’’
Step III : Calculate Difference between Step I & Step II

Existing VS New

Step IV : The calculated Difference in Step III will be incorporated in

‘’Opening B/S of Comparative year’’

_____________ B/S _____________

Retained + Assets +
Earnings
Liab. +

Note : In opening B/S of Comparative year, related Assets or Liab.

& Retained Earnings shall be adjusted due to change in Policy.
CA-Final Financial Reporting 60

Step V : Prepare ‘’Full Set of Re-stated Financial Statements’’ in

Comparative year as per New Policy [B/S, PL, CFS, EPS, SOCE etc.]

Step VI : Prepare Current year’ Financial Statements as per New Policy

in Normal way [Nothing will be done specially in C.Y because New
Policy is already carried from Previous year]

Special Note

If Any Existing Policy was selected in Previous year, but It needs to be

replaced with new Policy in current year then we will not Prepare
‘’Opening B/S of comparative year’’ as there are no Previous years
Effects. In the Given case, we will restate the Previous year’ Financial
Statements only. 3rd B/S

Exception of Unit I

If any Entity has to Apply ‘’Transitional Provisions’’ under any Ind AS

then Application of Transitional Provision should not be considered as
change in Policy, but relevant Transitional Provisions shall become
Applicable.

Unit III : Accounting Errors

As per the Provision of Ind As-8, Accounting Errors are the

Accounting mistakes in the Financial Statements of Previous
year/years, but these mistakes come into the knowledge of Entity in
current year. These Errors may include Errors of Omission, Errors of
Commission, Misinterpretation of Facts, Misapplication of any Policy/
Ind AS. These are also known as Prior Period Items. The rectification
of Errors will be done on retrospectively basis in same way as we have
learnt in case of change in Policy.
CA-Final Financial Reporting 61

Unit II : Accounting Estimate

As per the Provisions of Ind AS 8, Financial Statements are

Prepared on the basis of Many Accounting Estimates. These can be in
the form of :-

i) Estimation of NRV for Stock valuation

ii) Estimation of Fair value for Assets measurement
iii) Estimation of Salvage value
iv) Estimation of Useful life of Assets
v) Estimation of De-commissioning cost
vi) Estimation of PFDD etc.

In case, Change in Accounting Estimates takes place then changes

in Estimate shall be adjusted on ‘’Prospectively Basis’’. There will be no
need of any restatement in Previous Financial Statements, but all
changes shall be adjusted in C.Y.

Q. 16 [Errors : 3rd B/S concept]

Rectification of Errors
rd
3 B/S
Restated B/S as at 1.4.x2 [Beginning of Comparative year] :-

i) Investment Property (1,00,000 – 10,000) 90,000

ii) Other Equity : Retained Earning xxxx
Depreciation (10,000) xxxx

Restatement in Comparative year (x2-x3) :

Restated B/S :
Investment Property (90,000 – 10,000) 80,000

Restated SOPL :
Depreciation on I.P. (10,000)
CA-Final Financial Reporting 62

Financial Statements in current year (x3-x4) :

B/S : Investment Property (80,000 – 10,000) 70,000

SOPL : Depreciation on I.P. (10000)

*Part 2*

Q. 3 (SM : Errors)

Income Statement

2012 2011 (Restated)

Sales 1,04,000 73,500
Cost of Goods Sold (80,000) (60,000)
(86,500 – 6,500) (53,500 + 6,500)
PBT 24,000 13,500
Tax @ 30% (7,200) (4,050)
Net Profit 16,800 9,450

Statement showing Changes in Equity

S. Capital Retained Total

Earning
Opening Balance 5,000 20,000 25,000
(Beginning of 2011)
Re-stated NP in 2011 - 9,450 9,450

Restated C. Balance at the 5,000 29,450 34,450

end of 2011
NP in 2012 - 16800 16800
C. Balance at the end of 5,000 46,250 51,250
2012

Q. 19 (Repeated Question : 3)
CA-Final Financial Reporting 63

Q. 18 (3rd B/S : Change in Policy)

Income Statement

x2-x3 x1-x2 (Restated)

Sales 324 296
COGS (168) (159)
(173 + 15 – 20) (164 + 10 – 15)
Gross Profit 156 137
Expenses (83) (74)
Net Profit 73 63

Statement showing Restated SOCE (Extracts)

Balance in R.E. as at 31.3.x1 423

Increase in R.E. due to increase in C. Stock 10
Restated R.E. as at 31.3.x1 433
Add : Re-stated NP for x1-x2 63
Restated R.E. as at 31.3.x2 496
Add : NP for x2-x3 73
Balance as at 31.3.x3 569

Q . 17 : Discussed in class
Q. 14 *Imp (SM) (Error) : Discussed in class
Q. 24 (Repeated question : 14)
Q. 13, 12, 11, 10 (*Imp), 9, 8 (*Imp), 7, 6 : Discussed in class
Q. 5 : Homework

*Part 3*

Q. 23

As per the Provisions of Ind AS-8, the Given case of Additional

warranty Expenses should be considered as change in Estimation
because Defect in Production Process was not Identifiable in Previous
Financial year x2-x3. The company may have created Normal warranty
CA-Final Financial Reporting 64

Provisions due to constructive obligation on sales in x2-x3. The change

in warranty Exp. in current year due to defects should be Accounted for
on Prospectively Basis. The following Points may be considered for the
Treatment of various Exp. :-

I. The Company should write off ₹1,00,000 in current year’ SOPL as

warranty Exp. which has been incurred in x3-x4 on Goods Sold in x2-x3.

II. The Company should also write off ₹15000 (20,000 – 5000) as
warranty Exp. on Goods sold in x3-x4 itself.

III. The Company should include 5000 in the cost of opening stock
(1.4.x3) because this Exp. has been incurred on C. stock of defective
Goods in Previous year. In addition, Company should write off this
Stock by ₹2000 as valuation Loss because of NRV valuation.

a) (15000 + 5000) – 18000 = 2000 Loss

T. Cost NRV
or
b) 15,000 (cost) - (18000 – 5000) = 2000 Loss

NRV

Q. 22 (Repeated : Q. 18)
Q. 21 : Discussed in class
Q. 15 (IFR & IND AS 8) : Discussed in class

Q. 4 (Change in Policy : Prospectively Basis in an Exceptional Situation) :

In the Given case, It is impracticable to consider the

retrospective Adjustment for changes in Policy. It seems Practicable
to all adjustments from current year 2012. So, the Company can make all
changes on Prospectively Basis in the given situation with regard to
change in Depreciation & Cost model to Revaluation model. The Company
will consider the following changes :-
CA-Final Financial Reporting 65

a) A Revaluation Res. of ₹6000 (17000 -11000) will be created and It will

be disclosed under OCI

b) A DTL of ₹1800 on Revaluation (6000x 30%) will be created and will

be shown under OCI

c) An Excess Dep. of ₹500 (2000-1500) will be charged in SOPL due to

change in method of Dep.

Q. 1, 2 : Homework

Thank You 😊
Best of Luck…..!!!!!!
CA. Parveen Jindal
 Module-7
Index
Chapter
Particulars Page Range
No.
1 CHAPTER 01 CASE STUDIES ON IND AS
Part -1 1-4
Part -2 4-7
Part -3 7-10
Part -4 10-14
2 CHAPTER 02 FIRST TIME ADOPTION OF IND AS 101
Part -1 15-21
Part -2 21-23
Part -3 23-28
Part -4 28-34
Part -5 34-37
3 CHAPTER 03 PROFESSIONAL AND ETHICAL DUTY
Part -1 38-38
Part -2 38-38
Part-3 38-38
4 CHAPTER 04 ACCOUNTING AND TECHNOLOGY
Part -1 39-39
Part -2 39-39
5 CHAPTER 05 MISCELLANEOUS CHAPTER
Part -1 40-44
Part -2 44-51
Part -3 51-59
Part -4 60-61
Thank You
Best of Luck…..!!!!!!
CA. Parveen Jindal
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CA-Final Financial Reporting 1

Chapter 1- Case Studies on IND AS

*Part 1*

Case 1 (Nov 2020 Exam) (12 Marks)

Solution :

In the Given case, Treatment of Staff Loan & Interest on Staff

Loan is not as per Ind AS 109. The Given case can be considered at off
Market Terms because Market Rate is 10%, but company is charging 4%
only. So, Company should have computed Fair value of Loan at Market
Rate & Difference between Loan Given and Fair value should have been
Recognised as Prepaid Salaries which are to be amortised on SLM basis
over 5 years. Further, calculation of Interest should also have been
made at market rate on Amortised Balance The following calculation may
be considered :-

I. Statement showing Calculation of Fair value of Staff Loan

Period Cash Inflow PVF @ 10% Present

(P + I) (Market Rate) Value
1 240000 .909 218160
2 232000 .826 191632
3 224000 .751 168224
4 216000 .683 147528
5 208000 .621 129168
Fair value of Loan 854712

Prepaid Salaries = 10,00,000 – 854712 = 145288

II. Statement showing Amortisation Table

CA-Final Financial Reporting 2

Period Opening Bal. Interest @ Collections Closing Bal.

10%
1 854712 85471 (240000) 700183
2 700183 70018 (232000) 538201
3 538201 53820 (224000) 368021
4 368021 36802 (216000) 1,88,823
5 188823 19177 (208000) NIL
(Bal. fig)

Journal Entries (Ist year)

1) Staff Loan a/c Dr 854712

Prepaid Salaries a/c Dr 145288
To Bank 10,00,000
(Being Initial Recognition made at Market Rate)

Comments : On the basis of above Entry, It is clearly Indicated that

Recognition of Loan at 10 Lacs is wrongly done by
Accountant of Company.

2) Staff Loan a/c Dr 85471

To Interest 85471
(Being Int. made due at Market Rate)

Comments : On the basis of above Entry, It can be said that Treatment

of Interest is also wrong in the Given question.

3) Bank a/c Dr 240000

To Staff Loan 240000
(Being collection made)

4) Interest a/c Dr 85471

To P&L A/c 85471
(Being Income Recognised)
CA-Final Financial Reporting 3

5) P&L a/c Dr 29058 (145288/5)

To Prepaid Salaries 29058
(Being Salaries Amortised)

Case 2
Solution :

In the Given case, Classification of Asset under Held for sale is

Completely wrong because there is no intention of the Entity to
Sell the Specified Asset. It is clearly mentioned that the company will
use this Asset in future as demand of Product Picks up. The following
calculations should have been made by company :-

Statement showing Calculation of Carrying Amt. of Asset as on 31.3.x4

Original Cost 6,00,000

Depreciation for 3 year *(600000 x 3) (1,80,000)
10
Carrying Amt. of Asset as on 31.3.x4 4,20,000
Recoverable Amt. 3,50,000
Impairment Loss 70,000

*Additional Comments :

1. The Company can not stop charging Depreciation on Asset as it can

not be classified as Held for Sale
2. The Specified Asset should be reported under Non Current Assets
(PPE) as per Ind AS 16. It can be treated as Abandonment of Asset
only.

Case 3 : [Ind AS 10]

As per the Provision of Ind AS 10, Events after B/S date can
be adjusted in Financial Statements only if these Events are in
Knowledge of Enterprise at B/S date. In the Given case, Decline in
CA-Final Financial Reporting 4

value of Inventory has taken place due to Fire which can not be
considered as known Event. So, NRV of 7.6 Lacs is not considerable for
valuation of Stock.
The Goods have been Sold on 15.5 at ₹9 Lacs which is also more
than cost of Inventory. It means that there is no Hint for decline in
value of Inventory in Subsequent Sale as well.
So, valuation of stock should be made by the Entity at ₹8 Lacs
at B/S date.

Case 4 : (Ind AS 36) : Discussed in class

*Part 2*

*Imp
Case 5 : [Ind AS 16 & 40]
In the Given case, the following mistakes have been made by Venus
Limited while Preparing Financial Statements :-

A. As per the Provisions of Ind AS 16, Revaluation model can be opted

only if It is chosen for entire class of Assets. In means that
Revaluation can not be made Selectively for a Particular Asset, but
It Should be done for similar Assets on Global basis. In the Given
case, Venus Limited has opted Revaluation model on one Factory
Building, but Cost model for other one which is wrong. It should apply
Cost model or Revaluation model as per choice on Both Assets.

B. As per Ind AS 40, Revaluation model is not allowed on Investment

Properties. In the Given case, Venus Limited has opted Revaluation
model for I.P which is completely wrong. So, we should Apply Cost model
on such Asset.

C. The Venus Limited has disclosed all the Property as PPE which is correct
for P I & P II, but It is incorrect in relation to P III. The third
Property is held for Rental Purpose which should be reported as
Investment Property in B/S.
CA-Final Financial Reporting 5

D. The Entity should have calculated Depreciation for current year.

Calculation of Carrying Amt. of Properties if Cost model is opted

Property I Property II Property III

Original cost 15,000 10,000 12,000
Depreciation (1500) (1000) (1200)
Carrying Amt. 13500 9000 10800

B/S (Extracts)
Non current Assets :
Property, Plant & Equipment :
Property I 13500
Property II 9000 22500
Investment Property 10800

Statement showing Carrying Amt. of Assets if Revaluation model is

opted

Property I Property II Property III

Original cost 15000 10000 12000
Depreciation (1500) (1000) (1200)
Carrying Amt. 13500 9000 10800
Market value 16000 11000 -
R. Res. 2500 2000 -

B/S (Extracts)
Non-current Assets :-
Property, Plant & Equipment :
PI 16000
P II 11000 27000
Investment Property - 10800

Other Equity :
Revaluation Res. : P I 2500
P II 2000 4500
CA-Final Financial Reporting 6

Case 6 : [Ind AS 37) + (Ind AS 10) : Discussed in class

Case 7 : [Ind AS 41] : Discussed in class

*Imp
Case 8 : (Ind AS 115 : Revenues from Customers)

As per the Provisions of Ind AS 115, the Entity should consider

Time value of money while Recognition of Revenue from customer. It
can not recognise ₹10Lacs as Revenue because Amount is collected over
a Period of 2 year due to which assumed Interest is required to be
recognised as Time value of money. The concept is completely different
from AS-9 because there is no Explanation in AS-9 on Time value of
money.

Calculation of Present value of Future cash flows

Period CF PVF @ 5.36% Present value

0 3,33,333 1 3,33,333
1 3,33,333 .949 3,16,333
2 3,33,334 900 3,00,000
949667
( Rounding: 950000)
1) Cash a/c Dr 333333
Debtors a/c Dr 616334
To Sales 949667
(Being Goods Sold)

2) Debtors a/c Dr 33035 (616334 x 5.36%)

To Interest 33035 P&L
(Being Int. made due)

3) Cash a/c Dr 333333

To Debtors 333333
(Being collection made)
CA-Final Financial Reporting 7

4) Debtors a/c Dr 17298 (Bal. fig)

To Int. 17298

5) Bank Dr 333334
To Debtors 333334

*Part 3*

Case 10 :

(a) As per the Provisions of Ind AS 23, B. cost can be capitalised to the
Cost of Q. Assets only. A Q. Asset is an Asset that takes Substantial
Period of Time to get ready for its intended use or sale.
In the Given case, the sports company is constructing a
Stadium which can be considered as a Q. Asset because It will get ready
in Next Financial year which indicates that It is taking Substantial time
to get ready.
The Company is availing overdraft facility for the
Construction of Stadium in the Given case. It means that Interest on
overdraft can be considered for Capitalisation Purpose to the Cost of
Stadium. The following statement may be Prepared to calculate the
amount of Borrowing cost which can be capitalised under Ind AS 23 :-

Statement showing Calculation of B. cost

Month Balance in overdraft Interest @ 15% P.a. for

A/c Respective month
December x1 150 crores 1.875 crores

January x2 500 crores 6.25 crores

[150 + 350]

Feb. x2 850 crores 10.625 crores

[500 + 350]
CA-Final Financial Reporting 8

March x2 1200 crores 15 crores

[850 + 350] _________
Interest on overdraft 33.75 crores

i) Interest a/c Dr 33.75

To overdraft A/c 33.75
(Being Interest debited)

ii) Capital WIP/Q.A. Dr 33.75

To Interest 33.75
(Being Interest capitalised)

(b) In the Given case, the following observations can be Given :-

i) At the time of Acquisition of Registration of Player, the company can

consider it as an Intangible Asset under Ind AS 38 because company is
acquiring Rights from the Player. These Rights can be sold
subsequently which indicates that conditions of identifiability &
Economic Benefits are Satisfied. The Company has incurred many
Expenses in addition to Registration Rights Such as Agents fees,
Transfer fees etc. which can be capitalised to the cost of Intangible
Asset as per Ind AS 38 because these Exp. are directly related with
Acquisition of I. Assets.

ii) At the end of year, if Company decides to sell any Registration then
It will be considered as Non Current Asset Held for Sale under Ind AS
105. It will carried in B/S at Carrying Amt. or Net Fair value whichever
is Lower.

iii) If Any Registration is sold during the season, then It will be

treated as Disposal of I. Asset and Profit or Loss on Disposal will be
transferred to P&L A/c as per Ind AS 38.

iv) In the Given case, A Registration costing 49 crores has been sold
for 175 crores which indicates Profit of ₹126 crores, but the
transaction has taken Place in next year after B/S date due to which
CA-Final Financial Reporting 9

it will be recorded next year. It can not be taken as an adjusting

Event under Ind AS 10.

(c)
i) The Company can consider Naming Rights Benefits at the time of
Revaluation of Stadium because there is an Economic Benefit in
Naming Rights which can be Generated from Stadiums.

ii) There is no relationship between the sports company and Airlines

company. As per the Provisions of Ind AS 24, Common directors in 2
Entities do not create relationship between the Entities. So, there
will be no restriction on the Entities if they Enter into the
Transactions.

Case 11 :

(a)
i) The Agreement between two companies shall be considered as a Joint
Arrangement in the nature of Joint operation under Ind AS 111. It
can not be treated as a Joint venture because No Separate vehicle is
formed to take the benefits from storage facility. We are taking it as
Joint Arrangement because Activity is Subject to Joint Control. No
Entity can take decisions on its own.

ii) The following Points are to be considered before the understanding

of Accounting of Irrecoverable Gas :-

a) The Entities should consider storage facility as a PPE under Ind AS

16 and Respective share in ownership will be disclosed in B/S by each
Entity.

b) As per the Laws, Decommissioning is mandatory due to which company

should create Provision for De-commissioning cost as follows :-

PPE a/c Dr xxxx

To Provision for D. cost xxxx
CA-Final Financial Reporting 10

c) The Company should consider Cost of Irrecoverable Gas as a Part of

Cost of Storage facility and It will be depreciated over the useful Life
of Storage facility. If Gas is estimated to be recovered at the end
of Life of Asset then its Salvage value will be adjusted while computing
Depreciation on Storage facility.

b) In the Given case, Ind AS 109 cannot be applied because Non

Financial obligation is delivered in the form of delivery of Gas. There
is No Financial Asset or Financial Liab. In the Given case, one company
is making Payment in cash, but other company is delivering Goods.
Further, difference in Price will be considered as change in Estimation,
but not as a derivative contract. The Given Transaction shall be
Accounted under Ind AS 115.

*Part 4*

Case 9 : IND AS : 1 Q.27 (Already Done)

Case 12 : (IND AS : 1) (New Question)

Balance Sheet

Name of Company : Master Creator Private Limited

B/S as at : 31.3.x2

Assets Notes ₹
Non-current Assets :
A. PPE 4 49,87,750
B. Capital WIP (Building under const.) - 20,01,600
C. Investment Property (Land) - 15,48,150
D. Financial Assets : -
Other F. Asset (Deposits) - 4,62,500
E. Other Non current Assets 17,33,480

Current Assets :
A. Inventory - 5,98,050
CA-Final Financial Reporting 11

B. Financial Assets :
i) Investments 6 60,000
ii) Trade Receivables - 7,25,000
iii) Cash & CE - 1,16,950
iv) Other Financial Assets 5 1,27,370
C. Other current Asset (Prepaid Exp.) 5 90,000
Total (A) 1,24,50,850

Equity :
A. Share capital - 10,00,000
B. Other Equity 9 28,44,606

Non Current Liab.

A. Financial Liab. :
Borrowings 1 60,60,544
B. Long Term Provisions - 5,24,436
C. Deferred Tax Liab. (Net) 7 2,20,700

Current Liab. :
A. Financial Laib. :
Trade Payable - 6,69,180
Other Financial Liab. 3 119299
B. Other C. Liab. (TDS) 3 81,265
C. Current Tax Liab. - 9,30,820
Total (B) 1,24,50,850

Explanation on Errors & Mis-Statements :-

1. 8% Convertible Loan :
As per the Provisions of Ind AS 109, Convertible loan should
have been classified as a Compound Financial Instrument which is not
done by the company. The following corrections are required to be made
in Financial Statements of the company :-
CA-Final Financial Reporting 12

A. Identification of Liability & Equity components

Principal Value of Convertible Loan ₹64,00,000

Liability component :-
a) Interest (64,00,000 x 8% x 3.17) ₹16,23,040
b) Principal (64,00,000 x .68) ₹43,52,000 (₹59,75,040)

*Equity component (Bal. fig) ₹4,24,960

*It will be reported under other Equity

B. Amortised Statement

Years OB Interest @ 10% Actual Payment CB

x1-x2 59,75,040 5,97,504 (5,12,000) 60,60,544

Diff : 85,504 NCL : FL : Borrowings

SOPL : Exp.

2. Proposed Dividends
As per the Provisions of Ind AS 10, Proposed Dividend should
be ignored in Financial Statements which is recommended by BOD after
B/S date, but before Approval. The adjustment of Dividend is
considerable only if It has been paid by company during the year. So, we
have ignored the Given Proposed dividend of ₹50,000 because It has
been Proposed by BOD.

3. Other Financial Liabilities (current) :-

The Given Amount of other financial Liab. includes TDS
Payable which is not a Contractual Obligation to deliver cash. It should
be disclosed under the heading of other current Liab. The following
correction is required :-

Other Financial Liab. (current) 2,00,564

TDS Payable (81,265)
Correct Amt. 1,19,299
CA-Final Financial Reporting 13

4. PPE :

A. The Company has incorrectly included an Investment Property in PPE

So, It requires a correction on Classification.

B. The Company has also incorrectly included Capital w/p in PPE which is
also to be corrected for Presentation Purpose.

C. Revised Schedule for PPE :

Building 37,50,250
Vehicle 12,37,500
Total 49,87,750

5. Other Financial Assets :

The Company has included ‘’Prepaid Expenses’’ in Other
Financial Assets which should be classified under Other Current Assets.

Rectification in Schedule :

Other Financial Assets 2,17,370

Prepaid Exp. (90,000)
Correct Amt. 1,27,370

6. Current Investments :
The Company should have valued the Investments at Fair
value of 60,000 as per Ind As 109 and It should also have recorded a Gain
of 5000 in SOPL. This correction will also be incorporated in Financial
Statements.

7. Deferred Tax : [Correct Schedule]

Deferred Tax Liab. 4,74,850

Deferred Tax Assets (2,54,150)
Net DTL 2,20,700
CA-Final Financial Reporting 14

8. Calculation of Current year’ Profits :

Increase in R.E (25,00,150 – 21,25,975) 3,74,175

Add : F.V. Gain on Investments 5,000
Less : Interest Adjust. (85,504)
C.Y. : Profit 293,671

9. Statement showing Changes in Equity

Particular S. Capital Other Equity Total

Retained Compound
Earnings F.I : Equity
Opening Balance 10,00,000 21,25,975 - 31,25,975
Add : C.Y : Profit - 2,93,671 - 2,93,671
Add: Convertible
Loan issued - - 4,24,960 4,24,960
Total 10,00,000 24,19,646 4,24,960 38,44,606

Case 13 : IND As 101 : Q. 24

Thank You 😊
Best of Luck…..!!!!!!
CA. Parveen Jindal
CA-Final Financial Reporting 15

Chapter 2 -IND AS 101

*Imp for Practical
First Time Adoption of IND AS Life as well

*Part 1*

Concept 1 : Basic Knowledge on 101

As per the Provisions of IND AS 101, First Time adoption means

Preparation of Financial Statements are per IND Rules for the First
Time. The company should consider the following facts at the time of
Application of 101 :-

A. The Company Should Provide ‘’An Explicit and Unreserved Statement’’

that It has Applied all the IND AS. In the absence of this Statement,
It will be assumed that company has not applied IND AS Rules.

Q. 1 : Homework

B. The Company should Identify the ‘’Transition Date’’ of Financial

Statements from ‘’AS to IND AS’’
*Transition Date means ‘’Opening Date of Comparative year’’
Q2 : Disscussed in Class
C. The Company should Adjust. The B/S on Transition Date from AS
Rules to IND AS Rules.

It means that 101 Guides for B/S Adjustments on Transition Date

D. The Company should Present full Financial Statement for Comparative

year and Current year as per IND AS.

Note : It means that 3rd B/S concept is also valid under 101 as we had
discussed in IND AS 8.
CA-Final Financial Reporting 16

Concept 2 : Additional Factors under Transition Phase

As per the Provisions of IND AS 101, Adjustment in Assets or

Liabilities are not considered as change in Policy, but these are
recognised as Transitional Adjustments. An Entity may have to face
the following Problems while Appling 101 :-

➢ Adjustment in Measurement of Assets & Liabilities

➢ Adjustment in Headings of Assets & Liab. due to change in format
of B/S
(i.e., Division I to Division II)
➢ De-Recognition of Some Items which are not required under IND
AS
➢ Recognition of Some Items which are required under IND AS

Concept 3 : Transitional Rules

As per the Provision of Ind AS 101, Company can make adjustments in

the value of Assets & Liab. on Transition date under the following
Rules :-

Rule 1 : Mandatory Exemption

Under this Rules, Some of Assets & Liab. are required to be adjusted
‘’Prospectively’’. The Company is not allowed to make retrospective
Adjustments. It means that values of Assets & Liab. can not altered
retrospectively.

Rules 2 : Optional Exemptions

Under this Rule, Some of Assets & Liab. can be adjusted upon the choice
of the Entity. It means that the Entity can Apply Prospective
Adjustments as well as Retrospective Adjustments at its choice.
CA-Final Financial Reporting 17

Concept 4 : Examples of Adjustments in Assets & Liab.

Unit I : Examples on Mandatory Exemptions

(Retrospective Not Allowed)

A. Estimates & Provisions :

As per the Provisions of 101, The Entity will not change or

Revise the Provision which were created under AS-29 during Transitional
Phase. It means that Provisions in Previous GAAP B/S shall be
Transited in IND AS B/S at ‘’Carrying Amt. without any changes’’.

Exception

In case An Error has been identified in Provisions under Previous

GAAP then Rectification can be done on Retrospectively Basis.

*Imp (CFS)
B. Negative Non Controlling Interest :

As per the Provisions of Ind AS 101, Non Controlling Interest/

Minority Interest can not be transited from AS 21 to Ind AS 110 with
retrospective effects. If Minority Interest was reported at ‘’NIL
Value’’ under Previous GAAP B/S due to heavy Losses in Past then
Minority Interest will be recognised as NCI at ‘’NIL value’’ without any
adjustments. It can also be said that Parent can allocate share in
Future Losses to NCL but there will be no allocation of any Past Losses.
[*Negative Minority is not allowed in AS-21, but It is allowed
under Ind AS 110]

‘’With Prospective Effects only’’

CA-Final Financial Reporting 18

C. Government Loan at Concessional Rate/Forgivable Loans :-

As per the Provisions of 101, Government Loan at Concessional

Rate will be dividend into TWO headings on ‘’Transition Date’’ without
any Retrospective Adjustments as follows :-

Forgivable Loan

Fair value of Liability Govt. Grant (Bal. fig)

(Present value of Remaining
cash outflows at Market We will deal it as per
Rate on Prospectively Ind AS 20 after
Basis) Transition

We will deal it as per 109:

Financial Liab. after
Transition

D. Derivatives :

As per 101, Derivatives shall be Transited from Previous GAAP to IND

AS B/S on the basis of ‘’Fair value on Transition date’’. [*Changes in
Assets shall be adjusted in Retained Earnings]

Unit 2 : Examples for Optional Exemptions

A. PPE/Intangible Assets :

As per the Provisions of 101, An Entity can consider Fair value

or Carrying Amt. at its choice for Transition of PPE/I.A. from Previous
GAAP to Existing GAAP. [Note : If values of Assets get changed due to
Fair valuation on Transition date then Profit or Loss on valuation of
Assets will be adjusted in Retained Earnings]
CA-Final Financial Reporting 19

B. Investments [Subsidiary, JV, Associate, MF, other etc.] :-

As per the Provisions , Investments can be taken at Carrying

Amount as well as at Fair value at the choice of Entity. If Fair value is
opted then changes in value of Investments shall be adjusted in
Retained Earnings on Transition Date.

*Imp
C. Para 46/46 A in AS-11 :-

In case Company has a Long Term Foreign currency Loan under

Previous GAAP then It can be Transited to IND AS B/S as follows :-

Option I : The Company can continue Existing Policy even in Ind AS 21.
It means that Application of 46/46A can be continued on
Existing Loans under Ind AS 21 as well without any changes.

OR

Option II : The Company can Transit the Loan at Carrying Amt. to New
B/S and It can apply Ind AS 21 on Prospectively Basis. It
means there will be No Adjustment in Past Capitalised or
Amortised Exchange Difference.

D. FCTR [Foreign Operation] :-

Option I : The Company can continue with the Existing FCTR without any
adjustments
OR
Option II : The Company can de-recognise the Existing FCTR by
transferring it to ‘’Retained Earnings’’ and It can create
New FCTR as per Ind As 21.
CA-Final Financial Reporting 20

E. ESOP o/s into SBP Reserve :-

ESOP’s

Vested options on Unvested options on

Transition Date Transition Date

ESOP o/s should be

Option I : or Option II: converted into SBP
ESOP o/s ESOP o/s can Res. at Fair value only
can be be converted (Change in RE)
converted into SBP Res.
into SBP at Fair value
Reserve at under 102
Carrying Amt. (Changes in R.E)

F. Business Combinations :

Business Combination

Before Transition After Transition

Date Date

Apply 103 on all Future

Option I: or Option II: Combinations
We will Accept Re-State the Past
all calculations Combinations on
which were done *Retrospectively
under AS-14 Basis to Re measure
without any the ‘’GW’’
Adjustment [Back Date Application]
of 103
CA-Final Financial Reporting 21

*If any Past Business Combination is adjusted retrospectively then

Retrospective Application of 103 will become mandatory on all
Subsequent Combinations.

*Part 2*

Q. 3 (Change in Policy : ?) : Discussed in class

Q. 4 (Negative NCI)
As per the Provisions of Ind AS 101, An Entity can not allocate
Past Losses to NCI under Retrospective Adjustments as per
Mandatory Exemptions. It means that Negative NCI can be disclosed on
Prospectively basis only after Transition of B/S from AS-21 to Ind AS
110. It can also be said that NCI will have share in Future Losses only. If
Minority Int. has been disclosed at NIL value under AS-21 due to heavy
Losses then we will show NCI at ‘’NCI’’ value during Transition Phase in
Ind AS B/S.

Q. 5 (Business Combination)
Application of Ind AS 101 on Investment in Subsidiary

A. In SFS of A Ltd. (Investor) :

As per the Provisions, Investments can be transited from

AS 13 to Ind AS 109 at Carrying Amount or Fair value at the choice of
A Ltd.

B. In CFS of A Ltd. (Acquirer)

As per the Provision, Acquirer has option of Retrospective

Adjustment as well as Prospective Adjustments to transit the Past
Combinations. In the Given question, A Ltd is interested in Prospective
Adjustments. So, It is allowed under the Provisions. The following
calculation may be Referred for Computation of GW on Transition
Date:-
CA-Final Financial Reporting 22

GW = Assets – Liab. - NCI – Investments

Carrying Amt. % Share SFS

or Fair value of
on Transition outsiders Carrying Amt.
Date in B Ltd.
Choice
of A Ltd.

Q. 6 (Business Combination)

(i) If B Ltd. adopts Ind AS before A Ltd. :

There will be no need of any restatement in the financial
Statements of Subsidiary B because B Ltd. has its Financial Statements
as per Ind AS at the time of Preparation of CFS by A Ltd.

(ii) If B Ltd. adopts Ind AS after A Ltd. :

Yes, the Financial Statements of B Ltd. will be Restated as per

the requirements of A Ltd. because it is the responsibility of Subsidiary
Company to Provide Sufficient information to its Parent as per its
requirement. If A Ltd. goes for retrospective adjustment for its
Business combination under 101 then B Ltd. Financial information will be
restated as per the requirement of A Ltd.

Q. 7 (ESOP o/s to SBP Res)

Q. 9 (Deemed cost of PPE : Carrying Amt.)
Q. 10 (Revaluation GAAP) Discussed in class
Q. 12, 11 (AS-11 to Ind AS 21)

Q. 11
Solution : In the Given case, Company was not applying 46A in AS-11 due
to which company can not opt Application of 46A under Ind
AS 21. Same Policy can be continued which was followed under
Ind AS-11
CA-Final Financial Reporting 23

Q. 13 (Business Combination : Contingent Consideration)

:Disscussed in class
Q. 21 (Repeated question : 13)
Q. 29 (Repeated question : 12)

*Part 3*

*V.V. Imp
Q. 19 (8-10 marks)

Solution :

A. Calculation of Total Equity as per IND AS as at 1.4.x1

(i) Equity share capital 80 crores

(ii) Other Equity :
a) General Reserve 40 crores
b) Capital Reserve 5 crores
c) Retained Earnings : 50 crores
Appreciation in Land 5.5 crores
Appreciation in Invest .75 crores
Reversal of Dividend & .78 crores 57.03 crores
CDT
Total Equity 182.03 crores

B. Reconciliation of Total Equity under AS & IND AS

Total Equity as per AS Rules :

E.S. capital 80 crores
P.S. capital 25 crores
R&S 95 crores
200 crores

Adjustments :-
a) P.S. capital to be Re-classified as Financial Liab. (25 crores)
b) Fair value Adjustment : Land 5.5. crores
CA-Final Financial Reporting 24

Invest. .75 crores

c) Cancellation of PD & CDT .78 crores
Total Equity as per IND AS 182.03 crores

Q. 31 : Homework

Q. 30
Solution :

As per the Provisions, Company can opt not to continue Application

of Para 46/46A of AS-11 during the Transition Phase. If company avails
such an option then It will recognise all Exchange Fluctuations in
Monetary Items at B/S date in SOPL instead of any type of
Capitalisation or Amortisation. Further, the company will not consider
any Re-statement of Past Capitalisation of Exchange Fluctuations
under AS-11 which was done Prior to Transition Date. It means that F.C
Loan will be transited at Carrying Amount and will be measured in Future
on Prospectively Basis. It can also be said that there will be no
Retrospective adjustment in recorded/adjusted Exchange Fluctuations
in Earlier Period before Transition date.

Q. 28
Solution :

In the Given case, Company has opted for Fair valuation for PPE
on Transition Date. The company has also opted for Revaluation model
as its Measurement Rule for PPE instead of Cost model. The company
has changed its Policy during its Transitional Phase from AS to IND AS
which does not attract the application of IND AS 8 as Normal change in
Policy.
The Company is allowed to do the Specified changes in its first
IND AS Financial Statements under the Provisions of 101. So, the
specified changes should be considered as application of Transitional
Provisions instead of change in Policy.
CA-Final Financial Reporting 25

Q. 27
Solution :

In case Past Business combination is Re-stated then All Assets

& Liab. shall be adjusted retrospectively as per Ind AS 103. Under 103,
Acquisition method is referred for Business combination which Assumes
all Assets & all Liab. of Acquiree Co. at Fair value only.
It means that PPE of Acquiree can not be considered at
Deemed cost/Carrying Amt. in Restatement of Past Business
Combinations.

Q. 22
Solution :

In the Given case, Primary Statements of the Subsidiary shall

be considered on IFRS Basis for Consolidation Purpose. The Financial
Statements of Foreign Subsidiary in Indian currency are just
Secondary and Substituted Statements. So, we will consider IFRS as
Previous GAAP for Foreign Subsidiary.

New Point : Grants for Promoter’ Contribution

Under AS-12, Grant for Promoter’ contribution are transferred to

Capital Reserve, but Ind AS 20 transfers it to SOPL It means that
there is no concept of Capital Reserve under Ind AS 20.
As per the Provisions of 101, The company will De-recognise the
Balance in Capital Res. and will transfer it to Retained Earnings on
Transition date for all Past Such Type of Grants which were received by
The Entity Prior to Transition Date. It can also be said that these
Grants shall be adjusted with Retrospective Effects.

Journal (Transition Date) :

Capital Res. a/c Dr xxxx

To Retained Earnings xxxx
(Being C. Res. De-recognised)
CA-Final Financial Reporting 26

*IMP
Q. 20 (Promoter’ Contribution)
No, The Accounting Treatments under AS-12 for Promoter’
Contribution is not Acceptable under Ind AS 20 because AS-12 transfer
such contribution to Capital Res, but Ind AS 20 transfers it to SOPL.
In the Given case, Company should transfer the Balance of
Capital Reserve to Retained Earning on Transition date to match the
Financial Statements as per IND AS requirements.

Q. 16 [Grant at IRR, but Not forgivable]

Note : In the Given question, Market Rate of Interest and Actual Rate
of Interest are not mentioned due to which we are unable to
divide the Forgivable Loan between FL and Grant component So,
the Entire Loan has been classified as Liability and IRR has been
considered.

*[Link]
New Point : Compound Financial Instrument
(Retrospectively Adjustment are required to made)

Step I : Assume back date Application of Ind AS 109 on the date of Issue
of CFI for identifying the Liability component and Equity
component

Step II : Equity Component will remain same from the date of Issue till
Transition Date, but Liab. component will be computed by
Preparing Amortisation Table ‘’From the date of Issue of CFI
till Transition Date.’’
‘’It will Provide Carrying Am. of Financial Liability on Transition Date’’

Step III : + in Retained Earnings :

Equity Component Transition xxxx
Liab. Component Date xxxx
xxxx
Loan Amt. as per AS B/S (xxxx)
CA-Final Financial Reporting 27

Changes in RE xxxx
*IMP
Q. 14 (Compound Financial Instrument : from AS to IND AS)

A. Retrospective Identification of Liab. & Equity Component as at

1/4/2014

Principal Amt. 30,00,000

Debentures (Liab. Component) :-
i) Interest (30,00,000 x 6% x 3.17) 5,70,600
ii) Principal + Premium (33,00,000 x .68) 22,44,000 (2814600)
Debentures (Equity component) 185400

B. Amortisation Table for Liab. Component (1.4.14 – 31.3.16)

Years OB Int. @ 10% Payment CB

14-15 2814600 281460 (180000) 2916060
15-16 29,16,060 291606 (180000) 3027666

It is Carrying
Amt. of FL

C. Calculation of changes in R.E. on Transition Date

Liab. Component under Ind AS 109 3027666

Equity Component under Ind AS 109 185400
Total value under 109 32,13,066
Value as per Previous GAAP

i) Loan 30,00,000
ii) Premium 150000 (3150000)
300000 x 2Y
4Y
Changes in R.E 63066
CA-Final Financial Reporting 28
*We will reduce the RE due to Increase in value of Convertible Debt
under 109
*Part 4*
Q. 17 *V.V. Imp

Balance Sheet of Shaurya Ltd. on Transition Date

(As At 1.4.2018)

Assets Previous GAAP Adjustments IND AS Rules

Non-current Assets :
A. Property, Plant &
Equipment 20,00,000 5,00,000 25,00,000
B. Goodwill 1,00,000 - 1,00,000
C. Other I. Assets 2,00,000 - 2,00,000
D. Financial Assets :
(i) Investments 5,00,000 - 5,00,000
(ii) Loans 40,000 10,000 50,000
(iii) Other Financial
Assets 1,10,000 - 1,10,000
E. Other Non current
Assets 2,00,000 - 2,00,000

Current Assets :

A. Inventories 12,50,000 - 12,50,000

B. Financial Assets :
(i) Investments 18,00,000 30,000 18,30,000
(ii) Trade Receivables 9,00,000 - 9,00,000

(iii) Cash & Cash Eq. 10,00,000 - 10,00,000

(iv) Other Financial
Assets 3,50,000 - 3,50,000
C. Other Current Assets 50,000 - 50,000
_______________________ _____________ ____________ _____________
_____Total (A)__________ 85,00,000 5,40,000 90,40,000

Equity :
CA-Final Financial Reporting 29
A. Share capital 10,00,000 - 10,00,0000

B. Other Equity (W.N. #) 25,00,000 7,90,000 32,90,000

Non current Liabilities :

A. Financial Liabilities :
(i) Borrowings 4,50,000 - 4,50,000
B. Long Term Provisions 3,50,000 - 3,50,000
C. Deferred Tax Liab. 3,50,000 (50,000) 3,00,000

Current Liabilities :
A. Financial Liab.
i) Trade Payables 22,00,000 - 22,00,000
ii) Other F. Liab. 3,90,000 - 3,90,000
B. Other current Liab. 60,000 - 60,000
C. Short Term
Provisions 12,00,000 (2,00,000) 10,00,000
_______________________ _____________ ____________ _____________
_____Total (B)__________ 85,00,000 5,40,000 90,40,000

W.N. # Other Equity

Balance in R & S as per AS B/S 25,00,000

Adjustments:
i) Loan Investments 10,000
ii) Current Invest. 30,000
iii) DTA Income 50,000
iv) Cancellation of PD 2,00,000 2,90,000

Fair value Gain in RR on PPE 50000

other Equity as per Ind AS 3290000

Explanatory Notes :

A. PPE : As per the Provisions of IND AS 101, A Company can consider its
PPE at Carrying Amt. as well as at Fair value at its choice. If
Fair value of PPE is opted during Transitional Phase then
CA-Final Financial Reporting 30
changes in value of PPE will be adjusted in Retained Earnings
of the Entity.
Exception : If Fair value is opted under Revaluation model then
New changes in value shall be transferred to Revaluation
Point Res. instead of R.E.
In the Given case, Company is considering Revaluation model
as its Policy under IND AS due to which Appreciation of Rs.5
Lacs in office Building will be recorded in Revaluation Res. A/c
as Fair value Gain instead of R.E.

B. Intangible Assets : As per the Provision of 101, I. Assets can be

Transited in New B/S at Fair value or Carrying Amt.
at the choice of Company. In the Given case,
Company is not interested in considering Fair value
of I. Assets due to which I. Assets shall be carried
at Carrying Amt. There will be no Adjustment in R.E.
or R. Res.

C. Goodwill : As per the Provision of 101, A Company can consider Past

Business Combinations on Retrospectively as well as
Prospectively Basis at its own choice. In the Given case,
Company will carry Goodwill at its Book value of Rs.1,00,000
without any Retrospective Adjustment because required
Information for retrospective adjustment is not available.

D. Loans (NCA) : The Company has include Advance to Staff under Non
Current Loans which is a wrong Presentation because
Long Term Advance to Staff should be disclosed under
other Financial Assets in IND AS B/S.
The Loan to other company is a type of debt
Investment under 109 which attracts the retrospective
Application of Amortisation cost method. The company
has not Provided Trans cost for this Investment as
well as IRR is also not available. In the absence of
required information, Retrospective Table for current
Carrying Amt. on Transition date is not Possible, but
CA-Final Financial Reporting 31
Management has Provided Fair value of Investment
which has been considered while Preparing IND AS B/S.

E. Other NCA : In AS B/S, company has shown capital Advances in other

NCA which is also same under IND AS B/S. So, No
Adjustment or changes are required.

F. Current Investments : As per the Provisions of 101, Company can

disclose its Investment at Fair value as well
as at cost at its own choice. The Fair value
of Investment is 230,000 due to which there
will be an adjustment of 30,000 in the value of
Investments as well as R.E.

G. PFDD : As per Mandatory Exemption Rules in 101, Company can not

Revise the Provisions which were create under AS Rules. So, we
will ignore 25000 which is a revised Estimate.

H. Forgivable Loan : As per 101, Forgivable Loan is required to be dividend

under Financial Liab. & Grant Portion for the
remaining cash outflows on Prospectively Basis. In
the absence of remaining Period of repayment, It
Seems impracticable to find out such Break up of
Forgivable Loan. We can’t not accept the Given
Market value of Loan because Forgivable Loan is a
type of Mandatory Exemption. So, there will be no
adjustment in the Forgivable Loan.

Q. 24 *Imp

Ind-AS Impact Analysis Report

Issue I : PPE
CA-Final Financial Reporting 32

AS-10 Ind AS 101 Impact on F.S.

The Company had As per 101, Company has Increase PPE &
acquired a Land for choice to show its Retained Earnings by
Rs.5,00,000 which is PPE at Fair value or at 300000 (8L-5L)
still shown at cost of Carrying Amt. If
5,00,000 in AS B/S company wants to
Transit Land at FV of
800000 then It is
allowed

Journal : PPE a/c Dr 3,00,000

To *Retained Earnings 3,00,000
(Being Fair value adjustments made)

*We have not considered Revaluation Res. because It is not Specified

that company has opted for Revaluation model as its Policy under IND
AS.

Issue II : Investments in MF

AS-13 IND AS 101 Impact

As per the Provisions Under 101, Investments Increase the value of
of AS-13, Investments can be taken at Cost or Invest. & R.E by
are required to be FV at the choice of 100000 (5L-4L)
valued at Cost or MV company during
whichever is Lower. So, Transition Phase. So,
Investments have Investments can be
been shown at cost of taken at 5,00,000.
4,00,000

Journal : Investments a/c Dr 1,00,000

To Retained Earning 1,00,000
(Being F.V. Adjust made)
CA-Final Financial Reporting 33
Issue III : Borrowings

AS Rules Ind AS Rules Impact

Under AS Rules, the As per 101, Financial Reduce Borrowings by
Borrowings are shown Laib. should be adjusted 20000 from 200000 to
at Face value in B/S. on Retrospectively 180000 and Increase
There is no concept of basis. In the Given RE by 20000
Financial Liab. under information, we will
AS Rules. consider 180000 as New
Carrying Amt. of
Borrowings because
Amortised cost on
Transition date can
not be computed in the
absence of required
information

Journal : Borrowings a/c Dr 20000

To R.E 20000
(Being F.V. Adjust made)

Issue IV : Proposed Dividend

AS Rules Ind AS Rules Impact

In AS B/S, Company Under IND Rules, P.D. Cancel P.D. of 30000
has shown Proposed cannot be considered and write it back to RE
Dividend in S.T. as a Liab.
Provisions as Current
Liab.

Journal : Proposed Dividend Dr 30,000

To R.E. 30,000
(Being Cancellation of Dividend made)
CA-Final Financial Reporting 34
Issue V : Trademark

AS-26 IND AS 101 Impact

The Company has Under 101, Company has NO Impact because
shown a Trademark in choice to show company will carry the
AS B/S at cost of Trademark at Carrying Carrying Amt. of
Rs.250000. Amt. or at Fair value 250000 in IND B/S

Issue VI : DTL

AS-22 Ind AS 101 Impact

No Such Recognition As per 101, Company Reduce RE by 25000
has computed a DTL of and recognise a DTL
25000 on Transition of 25000
Adjustments

Journal : R.E a/c Dr 25000

To DTL 25000
(Being DTL created)

*Part 5*

Q. 15 : Discussed in Class

*Imp
Q. 18 (AS-27 to Ind AS 111 : Consolidation)

In the Given case , Company was Applying AS-27 for Consolidation

of Joint venture and AS-27 Refers to Proportionate Consolidation
method, but Ind AS 111 refers the Application of Equity method on
Joint ventures. So, we need to de-recognised all the consolidated
Assets & Liabilities of JV during Transition Phase.

Further, xyz has shown combined Goodwill from Subsidiary and

J.V. we should compute the GW from JV separately because It needs
de-recognition. So, the following Calculations may considered for
Transition from AS-27 to Ind AS 111 :-
CA-Final Financial Reporting 35

A. Calculation of Net Assets of JV without GW

PPE 1,200
Long Term Loans 405
Trade Receivable 280
Other C. Assets 50
Trade Payable (75)
Short Term Prov. (35)
N. Assets to be Derecognised 1825

B. Calculation of Related N. Assets to GW on Larger CGU Basis

PPE 22288
Long Term Loan 6350
Trade Receivable 1818
OCA 104
Trade Payable (8455)
S.T. Provisions (475)
Gross NA 21630

C. Calculation of GW related with JV

GW for JV = 1507 x 1825 = 127 GW

21630

D. Journal Entry for Transition

Investment in ABC Ltd. Dr 1952 (Bal. fig)

Trade Payable Dr 75
Short Term Prov. Dr 35
To PPE 1200
To Long Term Loans 405
To T. Receivable 280
To O.C.A 50
To GW 127
CA-Final Financial Reporting 36

(Being Assets & Liab. De-recog.)

Opening B/S as per IND AS (1.4.x1)

_______________________ Previous GAAP Adjustment IND AS

Non current Assets :
1. PPE 22288 (1200) 21,088
2. Investment Property 5,245 - 5,245
3. Goodwill 1507 (127) 1,380
4. Financial Assets
a) Investments in ABC - 1,952 1,952
b) Loans 6,350 (405) 5,945

Current Investments :
1. Financial Assets :
a) Investments 3763 - 3763
b) Trade Receivable 1818 (280) 1538
2. O.C. Assets 104 (50) 54
_______________________ ______________ _____________ ____________
______Total (A)________ 41075 (110) 40965

Equity :
1. Share Capital 7953 - 7953
2. Other Equity 16597 - 16597

Non current Liab.

1. Financial Liab. :
LTB 1000 - 1000
2. Long Term Provisions 691 - 191
3. Other NCL 5904 - 5904

Current Liab. :
1. Financial Liab. :
Trade Payable 8455 (75) 8380
2. S.T. Provisions 475 (35) 440
CA-Final Financial Reporting 37

_______________________ ______________ _____________ ____________

______Total (B)________ 41075 (110) 40965

*Imp
Q. 23 : Discussed in Class

Solution : (i) There is an Error in Previous GAAP because AS-10 also

requires D.C. but It did not Provide. So, Error should be
corrected on Transition date.

Thank You 😊
Best of Luck…..!!!!!!
CA. Parveen Jindal
CA-Final Financial Reporting 38

Chapter- 3 PROFESSIONAL AND ETHICAL DUTY

*Part 1*

Discussion in Class
Illustration 1,2 : Discussed in Class (Study Material Question)

*Part 2*

Discussion in Class
Illustration 3,4,5,6,7 : Discussed in Class (Study Material Question)

*Part 3*
Discussion in Class
Illustration 8,9 : Discussed in Class (Study Material Question)

Question 1 ( Study Material –Test Your Knowledge):Discussed in Class

Thank You 😊
Best of Luck…..!!!!!!
CA. Parveen Jindal
CA-Final Financial Reporting 39

Chapter 4- ACCOUNTING AND TECHNILOGY

*Part 1*

Discussion in Class

*Part 2*

Illustration -2,3,4 :Discussed in Class (Study Material Question)

Q. 1 : Discussed in Class (Study Material –Test Your Knowledge)
Q. 2 : Homework (Study Material –Test Your Knowledge)
Illustration - 1 :Discussed in Class (Study Material Question)

Thank You 😊
Best of Luck…..!!!!!!
CA. Parveen Jindal
CA-Final Financial Reporting 40

Chapter-5
Conceptual Framework for ‘’Financial Reporting’’ under ‘’Ind AS’’
(Revised)

*Part 1*

Unit I : Basis Introduction

The Conceptual Framework for Financial Reporting under Ind AS is

not a Standard and It does not override any Standard or any
requirement of any Standard. Therefore, It should not be considered as
a Part of set of Standards which are Prepared by Standard Setters. It
only helps various Parties in various ways as follows :-

A. It helps ICAI in formulation of Ind AS

B. It helps Preparers of Financial Statements in selection of
‘’Consistent Accounting Policies’’ in the areas where Entities do not
have any Guidance under any Ind AS or Entities have multiple
Accounting Policies.
C. It helps All Parties (i.e., Students, Professionals, Industry etc.) to
Understand Ind AS and to Interpretate the Ind AS.

Important Notes

(i) The Revised Conceptual Framework for Financial Reporting under Ind
AS is applicable w.e.f. 1.4.2020, but It was Revised by IASB in 2018.
(ii) If there will be any deviation in any rule of Ind AS from Conceptual
Framework then ICAI will show it in Appendix of such Ind AS.

Unit II : Objective & Limitation of Financial Reporting

(i) Objective of FR

The main objective of Financial Reporting is to Provide Financial

information of the Entity to its Existing or Potential Investors,
CA-Final Financial Reporting 41

Lenders and Creditors in decision making relating to Providing Finance.

The Decision making can be in the following forms :-

i) Buying, Selling or Holding the equity or debt instruments

ii) Providing or settling the other forms of credit
iii) Exercising the voting Power on Management’ action that affect
Resource and claims.

In addition to above, the following flow chart can be observed to

understand the objective of FR :-

Providing the Assessment of Estimation of = Decision

Financial Timing, Amount Returns making
Information or Uncertainty i.e. Dividends, Process
Regarding Net Interest, Loan
Cash inflows. Repayment etc.

Financial Reporting

Presents

Financial Position Transaction & Events

that affect Financial
Position
Economic Claims
Resources
(Assets ) (Liab.) Financial Cash Flows * Net Resulting
Performance from Financial
(Comprehensive) Performance
Income as Per
SOPL

*Financial Position can be affected by other reasons like new issue of

Shares, debentures etc.
CA-Final Financial Reporting 42

(ii) Limitations of FR

A. The Financial Reporting Provides useful information to the

Investors, Lenders and Creditors, but Such an information can not be
said as complete information because these Parties also depend on
other factors for their decision making Process such as Political
climate, Political events, Company’ outlook, Industry Performance etc.
B. The Financial Report does not Provide ‘’Current Market Value’’ of
Entity, but It only helps in Estimating such value.

Unit III : Qualitative Characteristics of Financial Reporting

The Financial Information should have two Basis Qualitative

Characteristics as follows :-

A. Relevance
B. Faithful Representative

A. Relevance

The Financial information should be relevant for its users. The

Financial Information is assumed to be relevant only if It has the
Following values :-

(i) Predictive value : If Financial information can be used as an Input to

the Process Employed by the users for their
Predictions about the Entity.

(ii) Confirmatory value : If Financial information can be used as a

feedback i.e., Comparison of Actual results in
current year with Past Predictions.

*Both the values are Inter-related and It is usually assumed that

Financial information with Predictive value has confirmatory value as
well.
CA-Final Financial Reporting 43

B. Faithful Representation

It is assumed that the Financial Reporting has been faithfully

Represented only if following features are there in it :-

I. Complete : The Financial Report should be complete with all

descriptions and Explanations so that Users can be use it
fully in Decision making.

II. Neutral: The Financial Report should not be biased. It means that
Selection or De-selection in any Part of report should not
happen.

III. Free from Errors : The Financial Report should be free from
errors so that Investors, Lenders and
Creditors can take correct decisions.

C. Extra Characteristics for Enhancement of Quality of Statement

I. Comparable : If Financial Statement Provide comparison of the

Entity with other Entities in same industry and with
itself by Comparison with Past Performance then It is
assumed that Financial Reporting is comparable.

II. Verifiable : If information can be verified by Direct and Indirect

method then It is assumed that information is verifiable
e.g. Direct = Physical count
Inventory (verification)
Indirect = Techniques i.e.,
FIFO, W. Adjust.

III. Timeliness : If Information is Presented before the investors on

time then It will be very useful for them in decision
making because older information may be useless for
investors.
CA-Final Financial Reporting 44

IV. Understandable : The Financial information should be clear and

concise So that Users with the basis knowledge of
Business can understand the Presented
information.

*Part 2*

Unit IV : Financial Statement & Reporting Entity

(i) Financial Statements

As per the Revised conceptual framework for Financial Reporting,

Financial Statement Provide Financial information about an Entity on
its Financial Position and Financial Performance. The Financial
Statements shall include :-

I. Balance Sheet = Recognising Asserts & Liabilities

II. Profit & Loss Statement = Recognising Incomes & Expenses
III. Other Statements = i) Cash flow Statement
ii) Statement showing changes in Equity (SOCE)
IV. Notes to A/c’s : i) Explanation on Recognised Assets, Liab., Equity,
Incomes and Expenses in the Financial Statements
ii) Explanation on Unrecognised Items in Financial
Statements
iii) Estimations, Assumptions & Judgements which
are used in Preparation of Financial Statements

As per the framework, It is also said that the following 2

Points should be kept in mind while Preparing Financial Statements :-

I. Fixed Reporting Period : The Financial Statements should be Prepared

for Fixed Reporting Period So that Users can Assess changes in Trend
or Results by comparing different Reporting Period. [In India,
Companies Follows Financial year as Reporting Period which begins from
Ist of April and Ends on 31st March]
CA-Final Financial Reporting 45

II. Going Concern : The Financial Statements shall be Prepared on the

basis of Assumption of Going concern. Under Going concern, It is
assumed that the Entity has neither the intention to Enter
Liquidation nor to cease the Trading in Foreseeable Future. It can
also be said that Entity will continue its business in Foreseeable
Future. If Such Assumption fails, Financial Statements shall be
Prepared on a different basis.

(ii) Reporting Entity

As per the framework, Reporting Entity is the Entity which is
required to Prepare or chooses to Prepare the Financial Statements. It
may be a Single Entity or Group of Entities. If an Entity is a single
Entity then its Financial Statements are recognised as ‘’Stand Alone
Financial Statements’’ OR ‘’Unconsolidated Financial Statements’’. If
Financial Statements are Prepared by a Group of companies (i.e.,
Holding & Subsidiary) then Financial Statements shall be recognised as
‘’Consolidated Financial Statements’’.

Important Note
Associate, Joint ventures etc.
If Group Statements are Prepared, but without Existing Holding/
Subsidiary Relationships then these Statements shall be recognised as
‘’Combined Financial Statements’’.

Unit V : Elements of Financial Statements

ELEMENTS

Economic Resource Claims Incomes Expenses

*Imp
Assets *Imp Elements on the basis of
Liability Equity Financial Performance

Elements on the basis of Financial Position

CA-Final Financial Reporting 46

*Imp
A. Meaning of An Assets

As per the Framework, An Asset is an Economic Resource for an

Entity which has the following 3 features :-
(i) Right
(ii) Potential of Economic Benefits
(iii) Control

Explanation on ‘’Right’’

A Right can be defined in two ways as follows :-

Right

Obligation of Another or Legal or Contractual

Party Right

I. Obligation of Another Party :

a) Right to Receive Cash

(i.e., Debtors, Investment in Debentures, Loans, Investment in FD
etc.)

b) Right to Receive Goods or Capital Goods

(i.e., Advance Given for Goods or PPE etc.)

c) Right to Exchange an Economic Resource under Favourable conditions

(i.e., Option contracts, Futures, Forwards etc.)

II. Legal or Contractual Rights :-

Legal Right mean ownership of Physical object Such as PPE, Investment

Properties etc. Contractual Rights means ROU under Leased Contracts
etc.
CA-Final Financial Reporting 47

Explanation on Potential to Generate E. Benefits

For the Existence of Potential, It does not need it to be certain

or Even Likely. It means that Assets may have Low Probability of
Potential to Generate Economic Benefits. It is only required that An
Economic Resource has Potential to Generate Economic Benefits.

Explanation on Control

Control means Power to direct the use of Economic Resource and

to obtain benefits from it. If an Entity can Prevent any other Entity
from taking Benefits from the Economic Resource then It will be
assumed that Such an Entity has control over the Economic Resource
It is the Present ability to Enforce Rights over the Economic Resource.

B. Meaning of ‘’Liability’’

As per the Conceptual Framework, A Liability should have the

following 3 features :-

A. It should be a ‘’Present Obligation’’

B. It should have ‘’Potential to transfer Economic Resource’’
C. It should be a” Result from Past Events’’

A. Explanation on ‘’Present Obligation’’

As per the Framework, An obligation is a duty or a responsibility

which can not be avoided. An Obligation is also considered as Owings to
other Parties and other Party may be a Person, Company or Group of
Companies etc. It means that identification of other Parties does not
matter, but It is important that there should be some owings.
CA-Final Financial Reporting 48

B. Potential to Transfer ‘’Economic Resource’’

An Obligation must have Potential to require the Entity to

transfer an Economic Resource. For Potential Exists, It does not need
to be certain or Even Likely. If means that An Obligation can be
Considered as a ‘’Liability’’ Even if the Probability of Transfer of
Economic Resource is very Low.

Examples of Transfer of Economic Resource :-

(i) Transfer of Cash (i.e., Creditors, Loans, Debentures, PSC etc.)
(ii) Transfer of Goods or Services (i.e., Advances taken)
(iii) Exchange of Economic Resource under Unfavourable conditions etc.

C. Result of Past Events

An Obligation should be a result from Past Events. It is assumed

that An Obligation is a result from Past Events only if :-

A. The Entity has already taken advantage from Past Transactions or

has taken actions in the Past and

B. As a Consequence of which, the Entity may or will require to transfer

its Economic Resource.

C. Meaning of ‘’Equity’’

As per the Framework, Equity means residual interest on the

Assets after deducting all Liabilities. The claim on Equity can be
Exercised by its holders (i.e., Equity holders).

D. Meaning of Incomes & Expenses

i) Incomes : An Income means Increase in Assets or Decrease in

Liability as a result increase in Equity
CA-Final Financial Reporting 49

ii) Expenses : An Expense means Decrease in Assets or Increase in

Liability as a result Decrease in Equity

As per the Framework, Users of Financial Statement may also be

interested in knowing Financial Performance of Entity in addition to
Financial Position of Entity. The Financial Performance can be measured
by Incomes and Expenses only.

Unit VI : Recognition & De recognition of Elements of Financial

Statements

PART A : Recognition *Imp

As per the Conceptual Framework, Recognition is a Process of

Capturing an Item for inclusions in Statement of P&L and Balance
Sheet which meets the definition of Elements in Financial Statements.

The Amount, at which Assets & Liab. are recognised in B/S, is

called Carrying Amount.

Link between Elements of Statements

Opening Equity Financial Performance SOCE Closing Equity

Assets - + Incomes - + Contributions = Assets-
Liabilities Expenses by holders and Laib.
Distributions
to holders .

As per the Framework, the following flow chart can be understood

for Recognition Rules :-
CA-Final Financial Reporting 50

Recognition Rules

Rule 1 : Relevance Rule 2 : Faithful Representation

Condition I : Existence Condition II : Existence Measurement

of Uncertainty of Low Rules
Probability

Condition I : Existence of Uncertainty

If It is not certain that Entity has right over an Economic

Resource or It is not certain that Entity has a Present Obligation
then Recognition can not be made for these Uncertain Items.

Condition II : Existence of Low Probability of Cash Flow

If Probability of Cash inflow for Assets and outflows for

Liabilities is very Low then these Items can not be recognised in
Balance Sheet of Entity. The correct Location to disclose Such items
is ‘’Notes to A/c’s’’.

Condition III : Measurement

We can recognise only those Items in B/S which can be

measured reliably. We all know very well that Financial Statements are
Prepared on the basis of Some Estimations. The Estimations can be
considered Good only if Items can be measured. The following
Situations can be considered in which we can say that Measurement
Principles are not workings :-

I. If Items have Exceptionally wide range of outcomes from the Point

of Cash flows and Estimation of such wide Range is very difficult

II. If Items are Exceptionally Sensitive to changes in Prices

CA-Final Financial Reporting 51

III. If it is Exceptionally difficult to allocate cash flows to outcomes

of Items

PART B : De-Recognition

As per the framework, De-Recognition means removal of Assets

& Liabilities from Financial Statements. We can de-recognise Assets &
Liabilities if :-

i) Entity has Lost its control over the Assets in Full or in Part or

ii) Entity has transferred Economic Resource for its Obligation in full
or in Part

Note : In case of Part De-recognition, retained Assets or Liab. will be

disclosed in Notes to A/c’s separately.

*Part 3*

Unit VII : Measurement

As per the Framework, when we Give a Monetary value to a

Recognised Asset or Liability then It can be called as Measurement of
Assets & Liabilities. There are many types of Measurement Basis for
Recognised Assets & Liabilities as follows :-
CA-Final Financial Reporting 52

Measurement methods

Historical cost method Current value method

Fair value Value in Use/ Current

Fulfillment Cost
Value
Entry
value
Exist value method method

I. Historical cost method

___________________________________________________________________
Assets Liabilities
Initial Recognition : Initial Recognition :
‘’Consideration + Transaction’’ ‘’Consideration - Transaction’’
Paid Cost Received Cost

Changes : Changes :
i) Depreciation/Amortisation i) Interest Accruals
ii) Impairment ii) Payments in Full/Part
iii) Interest Accrual iii) Onerous Liabilities
iv) Full/Part collections

Method II : Fair value method

(i) Under this method, It is estimated what will be realised if we sell an

Asset or Paid off if we settle a Liability.
(ii) An Active Market should be observed for Realisable or Payable values
(iii) It is based on Market Participants Perspective
(iv) Transaction cost is not considered under this method whether it is
related with Acquisition of Asset or Disposal of Asset
CA-Final Financial Reporting 53

Assets Liab.
Method III : VIU/Fuifillment method

(1) Value in Use : It is the Present value of all Future cash inflows which
are Expected to be Generated by An Asset
(2) Fulfillment value : It is the Present value of all Future cash outflow
which are Expected to be made related to a Liability
(3) The value in Use and fulfilment value are computed from Entity
Perspective
(4) The Transaction cost is not considered which is related with
Acquisition, but Transaction cost related with disposal is considered
while Estimating cash flows.

Method IV : Current cost method

Under Current cost method, Measurement of Assets & Liabilities
is done as follows :-

Assets = What would be Paid if Similar Assets are acquired

(Estimated Consideration required to be Paid + Estimated
Transaction cost)

Liabilities = What would be Received if Similar Liab. are taken

(Estimated Consideration to be received - Estimated
Transaction cost)

Factors to be Considered while choosing Measurement Basis

Factors

Relevance Faithful
Representation

Characteristics Contribution
of Assets/Liab. to Cash Flows Certainty Consistency
CA-Final Financial Reporting 54

*Imp
A. Characteristics of Assets & Liabilities

As per the Conceptual Framework, Assets & Liabilities should be

measured according to their Characteristics. The following two
Characteristics should be identified before deciding the Measurement
Rules :-

i) Variability of Returns Yes = Current value will be

ii) Sensitivity of ‘A/L’ to Market factors best

Example :
The Characteristics of a Derivative Instrument is Completely
different from an Instrument which will be held till its maturity. So,
Ind AS 109 Guides Application of Fair value model for Derivatives but
Amortised cost (Historical) model for the other one. The Variability of
returns and Sensitivity to market factors of a derivative is different

B. Contribution to Cash Flows

As per the Conceptual Framework, the Entity should consider the

Contribution of Items to Cash flows. If Items are Generating Cash
flows in a Group then Current value for individual Items may be
difficult to decide the Separate Valuation. If Items can Generate cash
flow without any dependence on other Items then we can find out
Individual Current value for Such Items.

Example : The Entity uses PPE & Intangibles in a Group to Produce

Inventory It indicates that All these Assets are dependent
on each other for Generating cash flow. So, Current value
model may not be Suitable for these Assets, but we should Go
for Historical cost model only.
CA-Final Financial Reporting 55

*Imp
C. Consistency

As per the framework, Financial Statement shall be assumed

Faithfully Reported only if Measurement Rules are applied from one
Financial Statement to other Financial Statement on consistent basis.
If Measurement Rules are followed on consistent basis only then
Comparison can be made between 2 Financial Periods. ‘’If Assets and
Liabilities are related to each other then Same Measurement Rule shall
be applied for both’’.

D. Certainity

As per the framework, It should be certain that Current value can

be observed by the Entity from an active market. If Active market does
not Exist for an Item, but It is measured on Current value model then
Its value will not be assumed ‘’certain’’ for Faithful Representation.
Such an Item should be Presented on Historical cost Basis.

Such value is not certain, but highly Estimated

Guidance under Framework for Initial Recognition

CA-Final Financial Reporting 56

Initial Recognition Rules for Assets & Liab.

If Transaction is carried If Transaction is carried

at Market Terms at off Market Terms

Initial Recognition will Initial Recognition will be

be made at made at
‘’Transaction Price’’ ‘’Fair value’’
(Diff between Transaction
Transaction Price represents Price and Fair value will be
Current value written off in SOPL)
because there is no Concession
in Consideration ‘’Price is Negotiated when
Transaction are undertaken
between Related Parties’’.

Holding & Subsidiary

Transaction

Unit VIII : Presentation & Disclosures

An Entity communicates the information about Assets, Liabilities,

Incomes, Expenses and Equity by Presenting & Disclosing the Financial
Statements. The Presentation & Disclosure should be based on
Following 4 Principle :-

i) The Entity should avoid Duplicate information in different Parts of

Financial Statements whenever Such duplication is not necessary.
ii) The Presentation & Disclosure should be Entity Specific rather than
Standardised descriptions
iii) The Entity should Provide Relevant information having Faithful
Representation
iv) The Entity should Provide comparable information
CA-Final Financial Reporting 57

Classification of Information in Presentation

A. Assets & Liab.

The Presentation of Assets & Liab. is required Separately if the

Items are dissimilar from the Point of view of their characteristics. We
can also say that Aggregation can be made in Presentation only for
Similar Items.

Important Point
If An Asset has different components and component are
dissimilar then all the Components shall be considered Separate Assets
and shall be Reported Separately.

B. Incomes & Expenses

As per the Rules, the Entity should report Incomes and

Expenses Separately which are different from their characteristics. The
Similar Items can be Aggregated.

C. Equity
The Conceptual framework requires Separate Presentation of
Equity if holders have different Rights for Claims on Equity.

D. Total Comprehensive Income

TCI As we discussed in Schedule III

(Division II)

Upper Part of SOPL Lower Part of SOPL

Normal P&L OCI

Recyclable Non Recyclable

CA-Final Financial Reporting 58

*Imp
Unit IX : Concept of Capital Maintenance

Capital maintenance

Financial Capital concept Physical Capital concept

Historical Current Purchasing

Capital Power concept
Concept

Historical Capital Maintenance = Closing capital – Opening capital

(Without any
Indexation or
Current cost Adjust.)

Comments = If difference between two capitals is zero or Positive then

It will be assumed that Entity is maintaining its capital.

Current Purchasing = Closing capital – Opening Capital x Closing Index

Power concept Opening Index

Comments = If difference between two capitals is negative then

Suggestion on reduction in drawings may be Given to entity
Because Entity is not maintaining its Capital as per
Inflation rate.
Physical Capital = Closing Capital – Opening capital at Current cost
Concept

Comments : If difference between 2 capitals is negative then Entity is

not maintaining Physical capital. So Suggestions can be
Given on reducing the distributions and increasing savings
to meet the requirements of capital maintenance.
CA-Final Financial Reporting 59
Example 11 of Study Material (Historical)
Statement showing Capital Maintenance

A. Calculation of Closing capital (Normal)

Opening Capital 12000
Profits [(6000 Units x 3) – (6000 U x 2)] 6000
Drawings (6000)
(Normal) Closing capital 12000

B. Capital maintenance :-

(1) Historical capital = Closing cap. – opening cap.

= 12000 – 12000
=0

Comments : The difference between two capitals is not negative which

indicates that Entity is maintaining capital.

(2) CPP capital = Closing capital – Opening cap. x Closing Index

Opening Index
= 12000 – 12000 x 120
1000

= 12000 - 14400
= (2400)

Comments : The difference is negative which indicates that Entity is

not maintaining its capital. So, Drawings should have been
up to 3600 only.

(iii) Physical capital = Closing capital – Opening capital at Current cost

= 12000 – (6000 Units x 2.5)
= (3000)

Comments : The Entity is not maintaining its capital because diff is

negative. So Drawings should have been up to 3000 only.
CA-Final Financial Reporting 60

*Part 4 *
Example of Study Material
Statements of P&L

Case I Case II
(Going Concern) (Not Going Concern)
A. Revenues
Revenues from operations 4,50,000 4,50,000
Total (A) 4,50,000 4,50,000

B. Expenses
Purchases 4,00,000 4,00,000
Change in Inventories (2000) (10000)
[32000-30000] [40000-30000]
Employees Benefit Exp. 14900 14900
Finance charges 3500 6000
Depreciations Amort. 15500 15000
(65000)+(10000) (65000-60000+10000)
5 4
Other Expenses : PFDD 2000 6000
Total (B) 433900 4331900
(a-b) NP 16100 18100

Balance Sheets
___________________________________________________________________
Non current Assets : Case I Case II
P.P.E. 52000 60000

Current Assets :
Inventories 32000 40000
Financial Assets :
i) Trade Receivables 23000 19000
(Net off PFDD)
ii) Other Assets 7500 -
iii) C & CE 33600 33600
148100 152600
CA-Final Financial Reporting 61

Equity : Share capital 60000 60000

Other Equity 41100 43100
NCL : 10% Loan 35000 37500
CL : T. Payable 12000 12000
148100 152600

Thank You 😊
Best of Luck…..!!!!!!
CA. Parveen Jindal