Page 21 - 23. COMPILER QB - IND AS 109_32

Upon receiving the new terms of the loan, Hello Limited, re-computed the carrying value of the loan by
discounting the new cash flows with the original effective interest rate and comparing the same with the
current carrying value of the loan. As per requirements of Ind AS 109, any change of more than 10% shall be

considered a substantial modification, resulting in fresh accounting for the new loan:

Date Cash flows Interest outflow Discount PV of cash flows
(principal) @15% factor

31-Dec-2017 (400,000,000)
31-Dec-2018 40,000,000 60,000,000 0.8969 89,686,099
31-Dec-2019 40,000,000 54,000,000 0.8044 75,609,805

31-Dec-2020 40,000,000 48,000,000 0.7214 63,483,092
31-Dec-2021 40,000,000 42,000,000 0.6470 53,053,542
31-Dec-2022 40,000,000 36,000,000 0.5803 44,100,068

31-Dec-2023 40,000,000 30,000,000 0.5204 36,429,133
31-Dec-2024 40,000,000 24,000,000 0.4667 29,871,422

31-Dec-2025 40,000,000 18,000,000 0.4186 24,278,903
31-Dec-2026 40,000,000 12,000,000 0.3754 19,522,235
31-Dec-2027 40,000,000 6,000,000 0.3367 15,488,493
PV of new contractual cash flows discounted at 11.50% 451,522,791

Carrying amount of loan (A) 397,489,650
Difference (B) 54,033,141

Percentage of carrying amount (B/A x 100) 13.59%

Note: Above calculations have been done on full decimals, though in the table the discount factor is limited to
4 decimals.

Considering a more than 10% change in PV of cash flows compared to the carrying value of the loan, the
existing loan shall be considered to have been extinguished and the new loan shall be accounted for as a
separate financial liability. The accounting entries for the same are included below:

d. 31 December 2017 – accounting for extinguishment

Particulars Dr. Amount (Rs.) Cr. Amount Remarks
(Rs.)
Loan from bank (old) A/c Dr 397,489,650 extinguished
Finance cost (profit and loss) Dr 2,510,350 bal fig.

To Loan from bank (new) A/c 400,000,000 new loan
(Being new loan accounted for at its principal amount in
absence of any transaction costs directly related to such

loan and correspondingly a de-recognition of existing loan)

23. 20