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MTPs QUESTIONS

Q5. (IND AS-28, APRIL 2018)

QA Ltd. is in the process of computation of the deferred taxes as per applicable Ind AS. QA Ltd. had acquired
40% shares in GK Ltd. for an aggregate amount of Rs. 45 crores. The shareholding gives QA Ltd. significant
influence over GK Ltd. but not control and therefore the said interest in GK Ltd. is accounted for using the

equity method. Under the equity method, the carrying value of investment in GK Ltd. was Rs. 70 crores on

31st March, 2017 and Rs. 75 crores as on 31st March, 2018. As per the applicable tax laws, profits recognised
under the equity method are taxed if and when they are distributed as dividend or the relevant investment is

disposed of.
QA Ltd. wants you to compute the deferred tax liability as on 31st March, 2018 and the charge to the

Statement of Profit for the same. Consider the tax rate at 20%.
SOLUTION

DTL created on accumulation of undistributed profits as on 31.3.2018

Carrying Value as Tax Taxable Total Deferred Charged to P&L during the
value per tax base temporary tax liability@ year
records differences 20%
a b c d E= b-d F = e x 20% g
31st March 2017 70 crore 45 crore 45 crore 25 crore 5 crore 5 crore
31st March 2018 75 crore 45 crore 45 crore 30 crore 6 crore 1 crore (6 crore – 5 crore)

Q6. (IND AS-28, APRIL 2019)

Bright Ltd. acquired 30% of East India Ltd. shares for Rs. 2,00,000 on 01-06-20X1. By such an acquisition

Bright can exercise significant influence over East India Ltd. During the financial year ending on 31-03-20X1
East India earned profits Rs. 80,000 and declared a dividend of Rs. 50,000 on 12-08-20X1. East India reported

earnings of Rs. 3,00,000 for the financial year ending on 31-03-20X2 and declared dividends of Rs. 60,000 on
12-06-20X2.

Calculate the carrying amount of investment in:

(i) Separate financial statements of Bright Ltd. as on 31-03-20X2;
(ii) Consolidated financial statements of Bright Ltd.; as on 31-03-20X2;
(iii) What will be the carrying amount as on 30-06-20X2 in consolidated financial statements?

SOLUTION

Carrying amount of investment in Separate Financial Statement of Bright Ltd. as on 31.03.20X2

Rs.
Amount paid for investment in Associate (on 1.06.20X1) 2,00,000
(assuming Cost Model followed as per IndAS 27)
Carrying amount as on 31.3.20X2 as per IndAS 27 2,00,000

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