Page 5 - 1. COMPILER QB - INDAS 1

(b) Term Loan from bank for Rs 11,110 million also includes interest accrued and due of Rs 11,110 million as

on the reporting date.
(c) Reserve for foreseeable loss is created against a service contract due within 6 months.

Required:
(1) Evaluate and report the errors and misstatements in the above extracts; and,

(2) Prepare the corrected Balance Sheet & Statement of Profit and Loss.
Solution

On evaluation of the financial statements, following was observed:
1. For foreseeable loss provision is made and not reserves. Hence, reserve for foreseeable loss for INR 1000

million, (due within 6 months), should be a part of provision. Therefore, it needs to be regrouped. If it was
also a part of previous year’s comparatives, then a note should be added in the notes to account for

regrouping done this year.

2. Interest accrued and due of INR 1,110 million on term loan will be a part of current liabilities since it is
supposed to be paid within 12 months from the reporting date. Hence, it should be shown under the

heading “Other Current Liabilities”.

3. It can be inferred from Note 3, that the deferred tax liabilities and deferred tax assets relate to taxes on
income levied by the same governing taxation laws. Hence, these shall be set off, in accordance with AS

22. The net DTA of INR 600 million shall be shown in the balance sheet.

4. The note to trade receivables was incorrectly presented. The rectified note would be as follows:

Trade receivables (Unsecured) INR in million
(a) Over six months from the date they were
due for payment
i. Considered good 0
ii. Considered doubtful 80

Less: Provision for doubtful debts (10)
(A) 70
(b) Others
i. Considered good 2,130

ii. Considered doubtful 0
Less: Provision for doubtful debts 0
(B) 2,130
Total (A + B) 2,200

1. It is common to have a termination clause in service contracts. Just by having a termination clause, a
company cannot create a liability. Para 14 of AS 29 inter alia states that a provision will be

recognized when an enterprise has a present obligation as a result of a past event.
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