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CA FINAL (Sep 2025)

GROUP I – PAPER 1
FINANCIAL REPORTING
(Series 2)
Time Allowed: - 3 Hours Maximum Marks: 100

This question paper comprises two parts, Part I and Part II.
Part I comprises MCQ & Part II comprises questions which require descriptive answers.

PART – I (MCQs)
All MCQs are compulsory

Question no. 1-15 carry 2 marks each

Case Study 1
On 1st April, 20X1, Johansen Ltd. acquired a new subsidiary, Bosman Ltd., purchasing all 150 million
shares of Bosman Ltd. The terms of the sale agreement included the exchange of four shares in
Johansen Ltd. for every three shares acquired in Bosman Ltd. On 1 st April, 20X1, the market value of a
share in Johansen Ltd. was ₹ 10 and the market value of a share in Bosman Ltd. ₹ 12.
The terms of the share purchase included the issue of one additional share in Johansen Ltd. for every
five acquired in Bosman Ltd., if the profits of Bosman Ltd. for the two years ending 31 st March, 20X3
exceeded a target figure. Current estimates are that it is 80% probable that the management of Bosman
Ltd. will achieve this target.
Legal and professional fees associated with the acquisition of Bosman Ltd. shares were ₹ 12,00,000,
including ₹ 2,00,000 relating to the cost of issuing shares. The senior management of Johansen Ltd.
estimates that the cost of their time that can be fairly allocated to the acquisition is ₹ 2,00,000. This
figure of ₹ 2,00,000 is not included in the legal and professional fees of ₹ 12,00,000 mentioned above.
The individual Balance Sheet of Bosman Ltd. at 1st April, 20X1 comprised net assets that had a fair value
at that date of ₹ 1,200 million. Additionally, Johansen Ltd. considered Bosman Ltd. possessed certain
intangible assets that were not recognized in its individual Balance Sheet:
 Customer relationships – reliable estimate of value ₹ 100 million. This value has been derived from
the sale of customer databases in the past.
 An in-process research and development project that had not been recognised by Bosman Ltd. since
the necessary conditions laid down in Indian Accounting Standards for capitalisation were only just
satisfied at 31st March, 20X2. However, the fair value of the whole project (including the research
phase) is estimated at ₹ 50 million.
 Employee expertise – estimated value of Director employees of Bosman Ltd. is ₹ 80 million.
 The market value of a share in Johansen Ltd. on 31st March, 20X2 was ₹ 11.
You are required to answer the following:
1. Calculate amount of purchase consideration

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 (a) ₹ 2,000 million
(b) ₹ 2,300 million
(c) ₹ 2,280 million
(d) None of the above
2. Calculate amount of net assets acquired
(a) ₹ 1,350 million
(b) ₹ 1,430 million
(c) ₹ 1,300 million
(d) ₹ 1,200 million
3. Calculate initial estimate of market value of shares to be issued as contingent
consideration
(a) ₹ 2,000 million
(b) ₹ 1,600 million
(c) ₹ 300 million
(d) ₹ 240 million
4. Compute the goodwill on consolidation of Bosman Ltd. that will appear in the consolidated
Balance Sheet of Johansen Ltd. at 31st March, 20X2
(a) ₹ 930 million
(b) ₹ 1,080 million
(c) ₹ 870 million
(d) ₹ 950 million
5. State the treatment of contingent consideration as on 31st March, 20X2
(a) Contingent consideration classified as equity should not be re-measured
(b) Contingent consideration classified as equity should be re-measured
(c) Contingent consideration classified as financial liability should not be re-measured
(d) Contingent consideration classified as financial liability should be re-measured

Case Study 2
Entity A acquired a subsidiary, Entity B, during the year ended 20X2. Summarised information from the
Consolidated Statement of Profit and Loss and Balance Sheet is provided, together with some
supplementary information.
Consolidated Statement of Profit and Loss for the year ended 20X2

Amount (₹)
Revenue 3,80,000
Cost of sales (2,20,000)
Gross profit 1,60,000
Depreciation (30,000)
Other operating expenses (56,000)
Interest cost (4,000)
Profit before taxation 70,000

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 Taxation (15,000)
Profit after taxation 55,000

Consolidated Balance Sheet

20X2 20X1
Assets
Cash and cash equivalents 8,000 5,000
Trade receivables 54,000 50,000
Inventories 30,000 35,000
Property, plant and equipment 1,60,000 80,000
Goodwill 18,000 –
Total assets 2,70,000 1,70,000
Liabilities
Trade payables 68,000 60,000
Income tax payable 12,000 11,000
Long term debt 1,00,000 64,000
Total liabilities 1,80,000 1,35,000
Shareholders’ equity 90,000 35,000
Total liabilities and shareholders’ 2,70,000 1,70,000

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

Particulars Amount (₹)

Inventories 4,000
Trade receivables 8,000
Cash 2,000
Property, plant and equipment 1,10,000
Trade payables (32,000)
Long term debt (36,000)
Goodwill 18,000
Cash consideration paid 74,000

During the year, Entity A also exchanged a PPE worth ₹ 10,000 with PPE of XYZ Ltd.
You are required to answer the following:
6. Amount of cash flows from operating activities
(a) ₹ 78,000
(b) ₹ 79,000
(c) ₹ 72,000
(d) None of the above
7. Amount of cash flows from investing activities

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 (a) ₹ 72,000
(b) (₹ 74,000)
(c) (₹ 72,000)
(d) ₹ 74,000
8. Amount of cash flows from financing activities
(a) (₹ 32,000)
(b) ₹ 32,000
(c) (₹ 4,000)
(d) ₹ 4,000
9. Amount of increase in cash and cash equivalents during the year
(a) ₹ 2,000
(b) ₹ 3,000
(c) ₹ 1,000
(d) ₹ 39,000
10. PPE exchanged with XYZ Ltd. will be part of which activity in the statement of cash flows?
(a) Cash flows from operating activities
(b) Cash flows from investing activities
(c) Cash flows from financing activities
(d) None of the above

Case Study 3
Autumn Limited has a policy of providing subsidized loans to its employees for their personal purposes.
Mrs. Jama Bai, a senior HR manager in the Company, took a loan of ₹ 12.00 lakhs on the following
terms:
 Interest rate 4% per annum
 Loan disbursement date: 1st April, 20X1
 The principal amount of the loan shall be recovered in 4 equal annual installments commencing
from 31st March, 20X2
 The accumulated interest computed on reducing balance at simple interest is collected in 3 equal
annual installments after collection of the principal amount
 Mrs. Jama Bai must remain in service till the principal and interest are paid
 The market rate of a comparable loan to Mrs. Jama Bai is 9% per annum
 The present value of ₹ 1 at 9% per annum at the end of respective years is as follows:

Year ending 31st March 20X2 20X3 20X4 20X5 20X6 20X7 20X8
Present Value 0.9174 0.8417 0.7722 0.7084 0.6499 0.5963 0.5470

Under the assumption that no probable future economic benefits except the return of loan has been
guaranteed by the employee, you are required to:
(i) Provide the journal entries at the time of initial recognition of loan on 1 st April, 20X1 and as at
31st March, 20X2; and
(ii) Prepare ledger account of 'Loan to Mrs. Jama Bai' from the inception of the loan till its final

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 payment.
You are required to answer the following:
11. Calculate initial recognition amount of loan to employee
(a) ₹ 12,00,000
(b) ₹ 9,00,000
(c) ₹ 10,40,000
(d) None of the above
12. Calculate prepaid employee cost
(a) ₹ 3,00,000
(b) ₹ 1,60,000
(c) Nil
(d) None of the above
13. Calculate finance income to be recognised in first year
(a) ₹ 93,927
(b) ₹ 1,08,000
(c) ₹ 93,600
(d) ₹ 48,000
14. Calculate closing balance of loan to employee at the end of first year
(a) ₹ 10,43,638
(b) ₹ 8,37,565
(c) ₹ 8,33,600
(d) ₹ 12,60,000
15. Calculate accumulated interest to be collected in 3 equal annual installments after
collection of the principal amount
(a) ₹ 72,000
(b) ₹ 1,08,000
(c) ₹ 1,20,000
(d) ₹ 84,000

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 PART – II (Descriptive Answers)
This part comprises 6 questions. Question No. 1 is compulsory. Attempt any
4 questions out of the remaining 5 questions.

Question 1 (14 Marks)

Mahalaxmi, a parent with a subsidiary Minilaxmi, is preparing the consolidated Balance Sheet at 30
September 20X7. The draft Balance Sheet for both entities as at 30 September 20X7 are given below:

Mahalaxmi Minilaxmi
₹’000 ₹’000
Assets
Non-current assets:
Property, plant and equipment (note 1) 966,500 546,000
Development project (note 1) 0 20,000
Investment in Minilaxmi (note 1) 450,000 0
1,416,500 566,000
Current assets:
Inventories (note 2) 165,000 92,000
Trade receivables 99,000 76,000
Cash and cash equivalents 18,000 16,000
282,000 184,000
Total assets 1,698,500 750,000
Equity and liabilities
Equity
Share capital (₹ 1 shares) 360,000 160,000
Retained earnings 570,000 360,000
Other components of equity 102,000 0
Total equity 1,032,000 520,000
Non-current liabilities:
Long-term borrowings (note 3) 300,000 85,000
Pension liability (note 4) 187,500 0
Deferred tax (note 1 and 2) 69,000 54,000
Total non-current liabilities 556,500 139,000
Current liabilities:
Trade and other payables 70,000 59,000
Short-term borrowings 40,000 32,000
Total current liabilities 110,000 91,000
Total equity and liabilities 1,698,500 750,000

Note 1 – Mahalaxmi’s investment in Minilaxmi

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On 1 April 20X7, Mahalaxmi acquired 120 million shares in Minilaxmi. Mahalaxmi made a payment of ₹
450 million in exchange for these shares. The individual interim financial statements of Minilaxmi
showed a balance of ₹ 340 million on its retained earnings on 1 April 20X7.
The directors of Mahalaxmi carried out a fair value exercise to measure the identifiable assets and
liabilities of Minilaxmi at 1 April 20X7. The following matters emerged:
Plant and equipment having a carrying amount of ₹ 440 million had an estimated fair value of ₹ 480
million. The estimated remaining useful life of this plant and equipment at 1 April 20X7 was four years.
An in-process development project of Minilaxmi’s had a carrying amount of ₹ 8 million and a fair value
of ₹ 18 million. During the six-month period from 1 April 20X7 to 30 September 20X7, Minilaxmi
incurred further development costs of ₹12 million relating to this project. These costs were correctly
capitalised in accordance with the requirements of Ind AS 38 – Intangible Assets. No amortisation of the
capitalised costs of this project was required prior to 30 September 20X7.
The fair value adjustments have not been reflected in the individual financial statements of Minilaxmi.
In the consolidated financial statements, the fair value adjustments will be regarded as temporary
differences for the purposes of computing deferred tax. The rate of deferred tax to apply to temporary
differences is 20%.
On 1 April 20X7, the directors of Mahalaxmi measured the non-controlling interest in Minilaxmi at its
fair value on that date. On 1 April 20X7, the fair value of an equity share in Minilaxmi was ₹ 3.80.
Note 2 – Intra-group trading
Since 1 April 20X7, Mahalaxmi has supplied a product to Minilaxmi. Mahalaxmi applies a mark-up of
25% to its cost of supplying this product. Sales of the product by Mahalaxmi to Minilaxmi in the period
from 1 April 20X7 to 30 September 20X7 totalled ₹ 30 million. One-third of the products which
Mahalaxmi has supplied to Minilaxmi since 1 April 20X7 were still unsold by Minilaxmi at 30
September 20X7. Any adjustment which is necessary in the consolidated financial statements as a
result of these sales will be regarded as a temporary difference for the purposes of computing deferred
tax. The rate of deferred tax to apply to temporary differences is 20%. No amounts were owing to
Mahalaxmi by Minilaxmi in respect of these sales at 30 September 20X7.
Note 3 – Long-term borrowings
Prior to 1 October 20X6, Mahalaxmi had no long-term borrowings. On 1 October 20X6, Mahalaxmi
borrowed ₹ 300 million to finance its future expansion plans. The term of the borrowings is five years
and the annual rate of interest payable on the borrowings is 6%, payable in arrears. Mahalaxmi charged
the interest paid on 30 September 20X7 as a finance cost in its financial statements for the year ended
30 September 20X7.
The borrowings are repayable in cash at the end of the five-year term or convertible into equity shares
on that date at the option of the lender. If the borrowings had not contained a conversion option, the
lender would have required an annual return of 8%, rather than 6%. Discount factors which may be
relevant are as follows:

Discount factor Present value Factor of year Cumulative present value

end 5 factors of years 1–5
6% 0.747 4.21
8% 0.681 3.99

Note 4 – Pension liability

Mahalaxmi has established a defined benefit pension plan for its eligible employees. The Balance Sheet
of Mahalaxmi at 30 September 20X7 currently includes the estimated net liability at 30 September
20X6. The following matters relate to the plan for the year ended 30 September 20X7:

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– The estimated current service cost was advised by the actuary to be ₹60 million.
– On 30 September 20X7, Mahalaxmi paid contributions of ₹ 70 million into the plan and charged
this amount as an operating expense.
– The annual market yield on high quality corporate bonds on 1 October 20X6 was 8%.
– The estimated net liability at 30 September 20X7 was advised by the actuary to be ₹ 205 million.
No benefits have been paid to date.
Required:
Using the draft Balance Sheet of Mahalaxmi and its subsidiary Minilaxmi at 30 September 20X7, and the
further information provided in notes 1-4, prepare the consolidated Balance Sheet of Mahalaxmi at 30
September 20X7. Unless specifically told otherwise, you can ignore the deferred tax implications of any
adjustments you make.
Note: You should show all workings to the nearest ₹’000.

Question 2A (10 Marks)

On 1st April, 2X01, A Ltd. issued a 10% convertible debenture with a face value of ₹ 1,000 maturing on
31st March, 2X11. The debenture is convertible into equity share of A Ltd. at the option of the holder at
a conversion price of ₹ 25 per share. Interest is payable half-yearly in cash. At the date of issue, A Ltd.
could have issued non-convertible debt with a ten-year term bearing a coupon interest rate of 11%.
On 1st April, 2X06, the convertible debenture has a fair value of ₹ 1,700.
A Ltd. makes a tender offer to the holder of the debenture to repurchase the debenture for ₹ 1,700,
which the holder accepts. On the date of repurchase, A Ltd. could have issued non-convertible debt with
a five-year term bearing a coupon interest rate of 8%.
How does A Ltd. account for the repurchase?

Question 2B (4 Marks)
Antarbarti Limited reported a Profit Before Tax (PBT) of ₹ 4 lakhs for the third quarter ending 30-09-
20X1. On enquiry you observe the following. Give the treatment required under AS 25:
(i) Dividend income of ₹ 4 lakhs received during the quarter has been recognized to the extent of ₹ 1
lakh only.
(ii) 80% of sales promotion expenses ₹ 15 lakhs incurred in the third quarter has been deferred to
the fourth quarter as the sales in the last quarter is high.
(iii) In the third quarter, the company changed depreciation method from WDV to SLM, which
resulted in excess depreciation of ₹ 12 lakhs. The entire amount has been debited in the third
quarter, assuming it is the charge for the 3rd quarter only.
(iv) ₹ 2 lakhs extra-ordinary gain received in third quarter was allocated equally to the third and
fourth quarter.
(v) Cumulative loss resulting from change in method of inventory valuation was recognized in the
third quarter of ₹ 3 lakhs. Out of this loss ₹ 1 lakh relates to previous quarters.
(vi) Sale of investment in the first quarter resulted in a gain of ₹ 20 lakhs. The company had
apportioned this equally to the four quarters.
Prepare the adjusted profit before tax for the third quarter.

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Question 3A (8 Marks)
Feel Fresh Limited (the Company) is into manufacturing and retailing of FMCG products listed on stock
exchanges in India. One of its products is bathing soap which Company sells under brand name 'Feel
Fresh'. The Company does not have its own manufacturing facilities for soap and therefore it enters
into arrangements with a third party to procure soaps. The Company entered into a long term purchase
contract of 10 years with M/s. Radhey. Following are relevant terms of the contract with M/s. Radhey.
(i) M/s. Radhey has to purchase a machine costing ₹ 10,00,000 from the supplier as specified by the
Company. The machine will be customized to produce the soaps as designed by the Company.
This machine cannot be used by M/s. Radhey to produce the soaps for buyers other than the
Company due to the design specifications. The machine has a useful life of 10 years and the
straight line method of depreciation is best suited considering the use of the machine.
(ii) The Company will pay ₹ 4.75 per soap for the first year of contract. This is calculated based on the
budgeted annual purchase of 7,00,000 soaps as follows:
Particulars Per soap price
Variable cost of manufacturing 4.00
Cost of machine (₹ 1,74,015/7,00,000 soaps) 0.25
M/s. Radhey's margin 0.50
Per soap cost to the Company 4.75

In case the Company purchases more than 7,00,000 (i.e. budgeted number of soaps) soaps in the
first year then the cost of the machine (i.e. 0.25 per soap) will not be paid for soaps procured in
excess of 7,00,000 units. However, in case Company procures less than budgeted number of
soaps, then the Company will pay the differential unabsorbed cost of the machine, at the end of
the year. For example, if the Company purchases only 6,00,000 soaps in first year then the
differential amount of ₹ 24,015 (1,74,015 – (6,00,000 x 0.25)) will be paid by the Company to
M/s. Radhey at the end of the year. Variable cost will be actualized at the end of the year.
(iii) The cost per soap will be calculated for each year in advance based on the budgeted number of
soaps to be produced each year. An amount of ₹ 1,74,015 shall be considered each year for the
cost of machine for year 1 to year 8 while calculating the cost per soap. Any differential under
absorbed amount shall be paid by the Company to M/s. Radhey at the end of that year. A charge
of ₹ 1,74,015 per annum for the machine is derived using borrowing cost of 8% p.a. For year 9
and year 10, only variable cost and margins will be paid.
(iv) M/s. Radhey does not have any right to terminate the contract but the Company has the right to
terminate the contract at the end of each year. However, if the Company terminates the contract,
it has to compensate M/s. Radhey for any unabsorbed cost of Machine. For example, if Company
terminates the contract at the end of second year then it has to pay ₹ 10,44,090 (i.e. 1,74,015 per
year x 6 remaining years). If it terminates the contract after the 8th year then the Company does
not have to pay the compensation since the cost of the machine would have been absorbed.
(v) In the first year, the Company purchases 5,50,000 soaps at ₹ 4.75 per soap.
Analyze the contract of the Company with M/s. Radhey and provide necessary accounting entries for
first year in accordance with Ind AS with working notes. Assume all cash flows occur at end of the year.

Question 3B (6 Marks)
Following details are given for Sunder Ltd. for the year ended 31st March, 2020:

(₹ in lakhs) (₹ in lakhs)

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 Sales (including inter-segment sales):
Food Products 10,000
Plastic and Packaging 1,240
Health and Scientific 690
Others 364 12,294
Expenses:
Food products 7,170
Plastic and Packaging 800
Health and Scientific 444
Others 400 8,814
Other items:
General corporate expenses 1,096
Income from investments 252
Interest expenses 126
Identifiable assets:
Food products 15,096
Plastic and Packaging 4,000
Health and Scientific 1,400
Others 1,364 21,860
General corporate assets 1,664

Other information:
(₹ ‘000)
(a) Inter-segment sales are as below:
Food Products 120
Plastic and Packaging 168
Health and Scientific 36
Others 10

(b) Operating profit includes ₹ (‘000) 66 on inter-segment sales.

You are required to identify reportable segments.

Question 4A (6 Marks)
On 1st January, 20X1 an entity purchased an item of equipment for ₹ 6,00,000, including ₹ 50,000
refundable purchase taxes. The purchase price was funded by raising a loan of ₹ 6,05,000. In addition,
the entity has to pay ₹ 5,000 in loan raising fees to the Bank. The loan is secured against the equipment.
In January 20X1 the entity incurred costs of ₹ 20,000 in transporting the equipment to the entity’s site
and ₹ 1,00,000 in installing the equipment at the site. At the end of the equipment’s 10-year useful life
the entity is required to dismantle the equipment and restore the building housing the equipment. The
present value of the cost of dismantling the equipment and restoring the building is estimated to be ₹
1,00,000.

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In January 20X1 the entity’s engineer incurred the following costs in modifying the equipment so that it
can produce the products manufactured by the entity:
 Materials – ₹ 55,000
 Labour – ₹ 65,000
 Depreciation of plant and equipment used to perform the modifications – ₹ 15,000
In January 20X1, the entity’s production staff were trained in how to operate the new item of
equipment. Training costs included:
 Cost of an expert external instructor – ₹ 7,000
 Labour – ₹ 3,000
In February 20X1 the entity’s production team tested the equipment and the engineering team made
further modifications necessary to get the equipment to function as intended by management. The
following costs were incurred in the testing phase:
 Materials, net of ₹ 3,000 recovered from the sale of the scrapped output – ₹ 21,000
 Labour – ₹ 16,000
The equipment was ready for use on 1st March, 20X1. However, because of low initial order levels the
entity incurred a loss of ₹ 23,000 on operating the equipment during March. Thereafter the equipment
operated profitably.
What is the cost of the equipment at initial recognition?

Question 4B (8 Marks)
Santosh Ltd. granted 500 options to each of its 2,500 employees in 2015 at an exercise price of ₹ 50
when the market price was the same. The contractual life (vesting and exercise period) of the options
granted is 6 years with the vesting period and exercise period being 3 years each. The expected life is 5
years and the expected annual forfeitures are estimated at 3 per cent. The fair value per option is
arrived at ₹ 15. Actual forfeitures in 2015 were 5 per cent. However at the end of 2015 the management
of Santosh Ltd. still expects that the actual forfeitures would average only 3 per cent over the entire
vesting period. During 2016 the management revises its estimated average forfeiture rate to 10 per
cent per annum over the entire vesting period. Of the 2,500 employees 1,900 employees have
completed the 3 year vesting period. 1,000 employees exercise their right to obtain shares vested in
them in pursuance of ESOP at the end of 2019 and 500 employees exercise their right at the end of
2020. The rights of the remaining employees expire unexercised at the end of 2020. The face value per
share is ₹ 10.
Show the necessary journal entries with suitable narrations. Workings should form part of the answer.
Do normal rounding off.

Question 5A (5 Marks)
Devi Ltd. prepares financial statements to 30 September each year. It provide information on revenue
transactions relevant to the year ended 30 September 20X7 as follows:
(i) On 1 April 20X7 Devi Ltd. sold a product to a customer for ₹ 121,000. This amount is payable on 30
June 20X9. The manufacturing cost of product for Devi Ltd. was ₹ 80,000. The customer had a right
to return the product for a full refund at any time up to and including 30 June 20X7. At 1 April
20X7, Devi Ltd. had no reliable evidence regarding the likelihood of the return of the product by
the customer. The product was not returned by the customer before 30 June 20X7 and so the right

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 of return for the customer expired. On both 1 April 20X7 and 30 June 20X7, cash selling price of
the product was ₹ 100,000. A relevant annual rate to use in any discounting calculations is 10%.
(ii) On 1 January 20X6 Devi Ltd. began an arrangement to sell goods to a third party – entity B. The
price of the goods was set at ₹ 100 per unit for all sales in the two-year period ending 31
December 20X7. However, if sales of the product to entity B exceed 60,000 units in the two-year
period ending 31 December 20X7, then the selling price of all units is retrospectively set at ₹ 90
per item.
Sales of the goods to entity B in the nine-month period ending on 30 September 20X6 totalled
20,000 units and this volume of sales per month was not expected to change before 31 December
20X7.
However, in the year ended 30 September 20X7, total sales of the goods to entity B were 35,000
and based on current orders from entity B, the estimate was revised. The directors of Devi Ltd.
estimated that the total sales of the goods to entity B in the two-year period ending 31 December
20X7 would be more than 60,000 units.
Explain the treatment of above transactions as per Ind AS 115.

Question 5B (5 Marks)
A Ltd. has a subsidiary B Ltd. On first time adoption of Ind AS by B Ltd., it availed the optional
exemption of not restating its past business combinations. However, A Ltd. in its consolidated financial
statements has decided to restate all its past business combinations.
Whether the amounts recorded by subsidiary need to be adjusted while preparing the consolidated
financial statements of A Ltd. considering that A Ltd. does not avail the business combination
exemption? Will the answer be different if A Ltd. adopts Ind AS after B Ltd?

Question 5C (4 Marks)
What is Equity, Income and Expenses as per ‘Conceptual Framework for Financial Reporting under Ind
AS’? How the information with respect to income and expenses helps the users in understanding of the
financial statements?

Question 6A (5 Marks)
Astra Ltd. is a listed entity which operates in the defence and fibre optics sector. It supplies fibre optic
cables and racks in the domestic country. This activity is only a trading activity for Astra Ltd. as it
procures goods from pre-approved suppliers, and after inspection, sells the goods to IT companies.
The sale contract requires Astra Ltd. to deliver these goods to the IT companies’ locations (i.e., delivery
on site). Payment terms are 30 days after the invoice date to Astra Ltd.
Ms. Suparna Dasgupta, a chartered accountant, has recently joined Astra Ltd. as the Head of the Finance
Department.
The Chief Operating Officer (also the executive director) of Astra Ltd. is Ms. Padmaja Srinivasan, a
mechanical engineer with an MBA from Harvard University, who rose through the ranks through her
excellent skills in project management, marketing, and customer management. Her remuneration
includes a bonus computed as a percentage of turnover achieved during the year, and an additional
incentive for achieving an EBITDA in excess of 15% of turnover.
Astra Ltd. has sold fibre optic cables amounting to ₹ 2 crores (invoice dated 31st March 20X2) to
Ethernet Bullet Ltd., a company providing high-speed internet connectivity services through fibre optic
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cables as well as dedicated leased lines. The service unit of Ethernet Bullet Ltd. is located next to the
factory of Astra Ltd. Though the goods were not moved to Ethernet Bullet Ltd.’s service unit, Astra Ltd.
recognized the sale for the year, based on the contention that the service unit is adjacent, and hence the
transfer can happen within few minutes.
The annual results are due for board approval, for the year ending 31 st March, and require the sign-off
of Ms. Suparna Dasgupta.
Ms. Suparna Dasgupta has been given a 40% increment on joining Astra Ltd., which enables her to
comfortably pay off her housing loan mortgage every month. Additionally, she is also given perquisites
in the form of business class travel, an exclusive chauffeur-driven car and stock options of the company.
Accordingly, she has stated that she cannot afford to lose this job as the salary and perquisites are
among the best in the country.
Ms. Padmaja Srinivasan has communicated to Ms. Suparna Dasgupta that many more benefits will
accrue if she agrees to present the numbers without any modifications. She has also said that the
company would not hesitate to replace Ms. Suparna Dasgupta should she disagree with the contentions
above.
Discuss the potential conflicts which are arising in the above scenario and the ethical principles that
would guide Ms. Suparna Dasgupta in responding to the situation.

Question 6B (5 Marks)
Loyal Ltd. has undertaken a project for expansion of capacity as per the following details:
Plan (₹) Actual (₹)
October, 20X1 5,00,000 4,00,000
November, 20X1 6,50,000 7,95,000
December, 20X1 20,00,000 –
January, 20X2 2,00,000 50,000
February, 20X2 9,00,000 2,00,000
March, 20X2 10,00,000 12,00,000
The company pays to its bank interest at a rate of 15% p.a., which is debited on a monthly basis. During
the half year, company had ₹ 20 lakh overdraft up to 31st December, surplus cash in January and again
overdraft of ₹ 14 lakh from 1.2.20X2 and ₹ 30 lakh from 1.3.20X2. The company had a strike during
December and hence could not continue the work during said period. However, the substantial
administrative work related to the project was continued. Onsite work was again commenced on 1 st
January and all the work were completed on 31st March. Assume that expenditure was incurred on 1st
day of each month.
Calculate interest to be capitalized giving reason wherever necessary. Assume overdraft will be less, if
there is no capital expenditure.

Question 6C (4 Marks)
A Company presents financial results for three years (i.e. one for current year and two comparative
years) internally for the purpose of management information every year in addition to the general
purpose financial statements. The aforesaid financial results are presented without furnishing the
related notes because these are not required by the management for internal purpose. During current
year, management thought why not they should present third year statement of profit and loss also in
the general purpose financial statements. It will save time and will be available easily whenever

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management needs this in future.
With reference to above background, answer the following:
(i) Can management present the third statement of profit and loss as additional comparative in the
general purpose financial statements?
(ii) If management present third statement of profit and loss in the general purpose financial
statement as comparative, is it necessary that this statement should be compliant of Ind AS?
(iii) Can management present third statement of profit and loss only as additional comparative in the
general purpose financial statements without furnishing other components (like balance sheet,
statement of cash flows, statement of change in equity) of financial statements?

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