Page 24 - 23. COMPILER QB - IND AS 109_32

Particulars Rs.
Present value of the principal repayable after 3 years 7,51,315

(10,00,000 x .751315)
Present value of Interest [(10,00,000 x 8%) x 2.48685] 1,98,948
Total Present Value of Long-term Loan Bond 9,50,263

Interest for the first year recognized in the books as per effective interest rate method
= Rs.9,50,263 x 10% = Rs. 95,026
However, interest paid is @ 8% i.e. Rs. 10,00,000 x 8% = Rs. 80,000

2.
a. Option (B): Cash/Bank A/c Rs. 10,00,000
To 8% LT Bond Series B A/c Rs. 9,50,263
To Share Option A/c Rs. 49,737
Workings for the above
It is a compound instrument.

Calculation of initial recognition amount of 8% Long term Loan Bond B Series liability and equity
component
Particulars Rs.

Present value of the principal repayable after 3 years (10,00,000 x .751315) 7,51,315
Present value of Interest [(10,00,000 x 8%) x 2.48685] S1,98,948
Total Present Value of Long-term Loan Bond B I 9,50,263
Issue proceeds from convertible bond II 10,00,000

Value of equity component (II – I) 49,737

b. 8% LT Bond Series B A/c Rs. 10,00,000

Share Option A/c Rs. 49,737
To Share Capital A/c Rs. 10,00,000
To Share Premium A/c Rs. 49,737
Reasoning:
As per Ind AS 32, on conversion of a convertible instrument at maturity, the entity derecognises the liability
component and recognises it as equity. The original equity component remains as equity (although it may be

transferred from one-line item within equity to another). There is no gain or loss on conversion at maturity

Q15 (March 19 – 8 Marks)

On 1 April 2018, an 8% convertible loan with a nominal value of Rs. 6,00,000 was issued at par. It is
redeemable on 31March 2022 also at par. Alternatively, it may be converted into equity shares on the basis of
100 new shares for each Rs. 200 worth of loan.
An equivalent loan without the conversion option would have carried interest at 10%. Interest of Rs. 48,000

has already been paid and included as a finance cost.
Present value rates are as follows:

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