Page 18 - 23. COMPILER QB - IND AS 109_32

● Subsequently, the financial liability is measured in accordance with Ind AS 109. While a subsequent
paragraph will deal with measurement of financial liabilities. The financial liability of Rs. 20,000,000
will be measured at amortised cost as per Ind AS 109 and finance cost of Rs. 2,000,000 will be

recognised over the exercise period.
● If the contract expires without delivery, the carrying amount of the financial liability is reclassified to
equity i.e. an amount of Rs. 22,000,000 will be reclassified from financial liability to equity.

(ii)

(1) At the time of initial recognition
Rs.
Liability component

Present value of 5 yearly interest payments of Rs. 40,000, discounted at 12% 1,44,200
annuity (40,000 x 3.605)
Present value of Rs. 5,00,000 due at the end of 5 years, discounted at 12%, 2,83,500
compounded yearly (5,00,000 x 0.567)

4,27,700
Equity component

(Rs. 5,00,000 – Rs. 4,27,700) 72,300
Total proceeds 5,00,000
Note: Since Rs. 105 is the conversion price of debentures into equity shares and not the redemption price, the
liability component is calculated @ Rs. 100 each only.

Journal Entry
Rs.
Bank Dr. 5,00,000

To 8% Debentures (Liability component) 4,27,700
To 8% Debentures (Equity component) 72,300
(Being Debentures are initially recorded a fair value)

(2) At the time of repurchase of convertible debentures
The repurchase price is allocated as follows:
Carrying Value Fair Value @ Difference

@ 12% 9%
Rs. Rs. Rs.
Liability component
Present value of 2 remaining yearly interest 67,600 70,360

payments of Rs. 40,000, discounted at 12% and
9%, respectively

Present value of Rs. 5,00,000 due in 2 years, 3,98,500 4,21,000
discounted at 12% and 9%, compounded yearly,
respectively
Liability component 4,66,100 4,91,360 (25,260)
23. 17