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Q10. (October 21 – 7 Marks)
WLL Ltd. was incorporated on 1st April, 20X1 and follows Ind AS in preparing its financial statements. In
preparing its financial statements for financial year ending 31st March, 20X4, WLL Ltd. used these useful
lives for its property, plant, and equipment:
Buildings : 15 years
Plant and machinery : 10 years
Furniture and fixtures : 7 years
On 1st April, 20X4, the entity decided to review the useful lives of the property, plant, and equipment. For
this purpose it hired external valuation experts. These independent experts certified the remaining useful lives
of the property, plant, and equipment o f WLL Ltd. on 1st April, 20X4 as
Buildings : 10 years
Plant and machinery : 7 years
Furniture and fixtures : 5 years
WLL Ltd. uses the straight-line method of depreciation. The original cost of the various components of
property, plant, and equipment were:
Buildings : Rs. 1,50,00,000
Plant and machinery : Rs. 1,00,00,000
Furniture and fixtures : Rs. 35,00,000
Compute the impact on the statement of profit and loss for the year ending 31st March, 20X5, if WLL Ltd.
decides to change the useful lives of the property, plant, and equipment in compliance with the
recommendations of external valuation experts. Assume that there were no salvage values for the three
components of the property, plant, and equipment either initially or at the time the useful lives were revised.
SOLUTION
1. The annual depreciation charges prior to the change in estimate were:
Buildings : Rs. 1,50,00,000 / 15 = Rs. 10,00,000
Plant and machinery : Rs. 1,00,00,000 / 10 = Rs. 10,00,000
Furniture and fixtures : Rs. 35,00,000 / 7 = Rs. 5,00,000
Total = Rs. 25,00,000 (A)
2. The revised annual depreciation for the year ending 31st December, 20X4, would be
Buildings : [Rs. 1,50,00,000 – (Rs. 10,00,000 × 3)]/10 = Rs. 12,00,000
Plant and machinery : [Rs. 1,00,00,000 – (Rs. 10,00,000 × 3)]/7 = Rs. 10,00,000
Furniture and fixtures : [Rs. 35,00,000 – (Rs. 5,00,000 × 3)]/5 = Rs. 4,00,000
Total = Rs. 26,00,000 (B)
3. The impact on Statement of profit and loss for the year ending 31st March, 20X5
= (B) – (A)
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