PAPER – 1:
FINANCIAL REPORTING
QUESTIONS
Case Scenario I
D Ltd. prepares financial statements to 31st March each year. Following
information on revenue transactions are relevant to the year ended
31st March 20X7.
(i) On 1st October 20X6, D Ltd. sold a product to a customer for
` 1,21,000. This amount is payable on 31st December, 20X8. The
manufacturing cost of the product for D Ltd. was ` 80,000. The
customer had a right to return the product for a full refund at any time
up to and including 31st December 20X6. At 1st October 20X6, D Ltd.
had no reliable evidence regarding the likelihood of the return of the
product by the customer. The product was not returned by the 3
customer before 31st December 20X6 and so the right of return for the
customer expired. On both 1st October 20X6 and 31st December 20X6,
the cash selling price of the product was `1,00,000. A relevant annual
rate to use in any discounting calculations is 10%.
(ii) On 1st July 20X5 D Ltd. began an arrangement to sell goods to a third
party B Ltd. The price of the goods was set at `100 per unit for all
sales in the two-year period ending 30 th June 20X7. However, if sales of
the product to B Ltd. exceed 60,000 units in the two-year period
ending 30th June 20X7, then the selling price of all units is
retrospectively set at `90 per item.
1 7 75 20000Wh 31 3 76
35000
31 3 47
I
100 0 Revenue 55000 90
2099810 20L
609 202
29ft
35000 90
L
20000 10
REVISION TEST PAPER
FINAL EXAMINATION
Sales of the goods to B Ltd. in the nine-month period ending on
31st March, 20X6 totalled 20,000 units and this volume of sales per
month was not expected to change before 30 th June 20X7.
However, in the year ended 31st March, 20X7, total sales of the goods to
B Ltd. were 35,000 and based on current orders from B Ltd., the estimate
was revised. The directors of D Ltd. estimated that the total sales of the
goods to B Ltd. in the two-year period ending 30th June 20X7 would be
more than 60,000 units.
On the basis of the facts given above, chose the most appropriate
answer to Questions 1 to 5 below based on the relevant Indian
Accounting Standards (Ind AS).
1. When and by what amount the revenue be recognized with respect to
sales made on 1st October, 20X6?
(a) On 1st October, 20X6 by ` 1,21,000 TR R IL
(b) On 1st October, 20X6 by ` 1,00,000
To Rev 12
st
(c) On 1 October, 20X6 by ` 80,000
(d) On 31st December, 20X6 by ` 1,00,000
2. What will be the amount of finance income to be recognized with
respect to sales in the year 20X6-20X7?
31 3 2047
TR De2500
(a) ` 5,000
(b) ` 2,500
100000 10
Tof (c) ` 10,000 772
(d) ` 2,000
3. What will be the amount of Trade Receivable as on 31st March 20X7,
against the sale made on 1st October 20X6?
(a) ` 1,21,000
(b) ` 1,00,000 100000 2500
(c) ` 1,02,500
(d) ` 1,05,000 102500
2 NOVEMBER 2024 EXAMINATION
REVISION TEST PAPER
FINANCIAL REPORTING
4. What will be the amount of revenue to be recognized in the year
20X5-20X6 with respect to sales arrangement with B Ltd.?
(a) ` 20,00,000
(b) ` 18,00,000
(c) ` 55,00,000
(d) ` 49,50,000
5. What will be the amount of revenue to be recognized in the year
20X6-20X7 with respect to sales arrangement with B Ltd.?
(a) ` 35,00,000
(b) ` 29,50,000
(c) ` 55,00,000
(d) ` 49,50,000
Case Scenario II
M/s XYZ & Co. is an auditing firm. During his audit, the firm is facing
difficulty in accounting of the following transaction for which, it seeks your
answer:
(i) A Ltd. has established a defined benefit pension plan for its eligible
employees. The balance sheet of A Ltd. at 31st March, 20X7 currently
includes the estimated net liability at 31st March, 20X6 amounting
`18.75 crore. The following matters relate to the plan for the year
op nettial ended 31st March, 20X7:
– The estimated current service cost was advised by the actuary to
be `6 crore.
– On 31st March, 20X7, A Ltd. paid contributions of ` 7 crore into
the plan and charged this amount as an operating expense.
– The annual market yield on high quality corporate bonds on
1 April, 20X6 was 8%.
– The estimated net liability at 31st March, 20X7 was advised by the
actuary to be `20.5 crore.
19.25
No benefits have been paid to date. 155
3 NOVEMBER 2024 EXAMINATION
REVISION TEST PAPER
FINAL EXAMINATION
(ii) On 1st April 2XX0, E Ltd. completed the construction of a non-current
asset with an estimated useful life of 20 years. The costs of construction
were recognised in property, plant and equipment and depreciated
appropriately. E Ltd. has a legal obligation to restore the site on which
the non-current asset is located on 31st March 2X20. The estimated cost
of this restoration work, at 31st March 2X20 prices is `2.5 crore. The
directors of E Ltd. have made a provision of ` 0.125 crore (1/20 x ` 2.5
crore) in the draft balance sheet at 31st March, 2XX1. An appropriate
annual discount rate to use in any relevant calculations is 6% and at this
rate the present value of ` 1 payable in 20 years is 0.312.
On the basis of the facts given above, chose the most appropriate
answer to Questions 6 to 10 below based on the relevant Indian
Accounting Standards (Ind AS).
6. What is the amount of net adjustment to be made in the statement of
profit and loss for the year 20X6-20X7 with respect to defined benefit
Cl
6 exp pension plan?
(a) ` 7 crore added back to the profit of the year 20X6-20X7
7 rever
1.5 F cost
(b) ` 6 crore deducted from the profit of the year 20X6-20X7
(c) ` 0.5 crore deducted from the profit of the year 20X6-20X7
(d) ` 1.5 crore deducted from the profit of the year 20X6-20X7
7. What is the amount of actuarial gain/(loss) on defined benefit pension
9
18.75 plan for the year 20X6-20X7?
(a) ` 1.5 crore
(b) ` 1.25 crore
(c) ` 1 crore
(d) ` 0.5 crore
8. What is the original provision required to be made on account of C2
restoration of non-current asset in the year 2XX0-2XX1?
(a) ` 0.78 crore 2.59 0 312
(b) ` 0.125 crore
4 NOVEMBER 2024 EXAMINATION
REVISION TEST PAPER
FINANCIAL REPORTING
(c) ` 0.039 crore
(d) No provision was required in the year 2XX0-2XX1 as it is the
expense of the year 2X19-2X20
9. What will be the amount of adjustment to be made in the retained
earnings on account of restoration provision?
C2
FC 00468 (a) ` 0.0468 crore
0.039
0 (b) ` 0.0390 crore
0.0858 (c) ` 0.0392 crore
(d) ` 0.125 crore
Is 10. What will be the amount of one year’s unwinding of discount on account
of restoration provision?
C2
(a) ` 0.0468 crore
(b) ` 0.0390 crore
(c) ` 0.0392 crore
(d) ` 0.125 crore
FEBITanabler ms
Ind AS 12 ‘Income Taxes’
11. X Ltd., an Indian company owns a freehold land with carrying value of
`10,00,000 which is not depreciated for tax purposes but is indexed for
indexed
inflation. Indexed value and fair value of such land is ` 15,00,000 and
`22,00,000 respectively as of the reporting date. What will be the tax
FV base for such freehold land for measurement of deferred tax if:
(i) X Ltd. intends to sell it as a part of slump sale of business
CAIO eventually after using it for business purpose
10L Tanbase
If
(ii) X Ltd. intends to sell the land individually and not on a slump sale
basis
(iii)
TB 15L
X Ltd. has classified such land as investment property and intends
DIE (iv)
to sell it individually and not on a slump sale basis
X Ltd. follows a revaluation model for freehold land and intends
to sell it individually and not on a slump sale
5 NOVEMBER 2024 EXAMINATION
m
A 22L
ISIL
DTA EIR DTL
Tau base of an asset
FEB available
Tanable
Yes
L
TB Future dedn TB CA of
available from asset
the asset
Repeats
stay
Yes TAX Lease
Identified asset Nosslease
AAX
AAV
ABC owner of
orchard
Repeat
1141 2 31 31 5 31 3 46 29 4
46
I
TA 9L Discovered
life that WH
is
soy
damaged
D 33333 t
yr structural
fault
CA 9L
20 3 17
52941
i Excess depn to be
charged
52941 33333
19608
CA 900000 33333 19608 847059
RA 600000
i 1 Loss 247059 Ind AS 36
If
Rainfall
News
pv ui
with Rest costs s benefits 65.14.000
without Rest costs s benefits 62,73 000
If Rest provision is made
CA 65L
RA 65.142
Impairment loss
Ind AS 3
If Rest provision is not made
CA 65L
RA 62 73L
Impairment loss 2.27L
Ind AS 362 Impairmentlos
Keat
gw
F 80L
LI
A
R 10L lost 20000
up
in
4 PL
iY Investments 1320000
FV INA 1000000
of
Goodwill 320000
is Franchisee 8000000 4 51 1
Amortisation 600 0002 X1 X2
life 5
6400000
in 250000 4 71 1
copyright
Amortisation 2500 X1 X
life 109
225000
700000 Prosecution costs PL
700000 20000
Prosecution
costs
21 of Musical
02
Rev
20000
o
1 101 1
cost 2 moves Inone 0.142
Gpr of Prov DRRC
constructive
obligation
2.142 cloves
Es Asset Dr 2.142
To Bank 2
To P DRRC 0 142
Non current liab
Provision DRRC
for fy ended 31 3 42
Depn of facility 24
52611
Finance costs on
unwinding
5
01142 6 12
E35,50
At YE 31.3 X2
RA of Asset 21152,250
CA of Provision 1455000
Beat
Query will costs be capitalised
borrowing
on the basis of
cost outflows or
cost accrued
Notional cost be capitalised
borrowing
If cost is incurred but outflow didn't
happen will cost be incurred
borrowing
i conclusion cash outflows
cost accrued
Amt in 000
WNI calm of Purchase consideration
cash 1000
360
FV of share
exchange
200 1 8
PV of Deferred consid 375
500 075 1735
WN 2 Allocation of INA
DOA Post RD
31 31 3
1 41 1
Sh Capital 500 500
Ret Earnings 125 175 300
FV
adj Plant 200
Excess depn 80
200 5 2
825 95
P 801 76
goodwill
calm I
NO 20 19
INN Goodwill
Investments 1735
FV 380
of NO 825
FV INA on DOA
of
1290
Less 258
Impairment
1032
WM 3 NCI
NCI on DOA 380
Postag Profits 19
9W Impairment 51 6
258 201
347 40
WNG Consol RE
Parent's RE 1400
Post RE to
aug
GW Impairment 206 40
258 801
Finance costs 37 5
on Deficons 41 25
375 101
412.5 101
1190185
200 80
141290 258
160
DC
HE
indas
Psa Right'Et and
JA
Q
nd Asao a
I
p Equity
indas 40 B
Method
and As
28
I
Super 60 70
