Page 3 - 23. COMPILER QB - IND AS 109_32

SOLUTION

1. The reversal of impairment loss took place in the 6th year. However, goodwill is amortised in 5 years.
Therefore, there would be no balance in the goodwill account in the 6th year even without impairment
loss. Hence in W.N. 2 above there is no column for recalculation of goodwill.
(i) At the time of initial recognition

Rs
Liability component
Present value of 5 yearly interest payments of Rs 40,000, discounted 1,44,200

at 12% annuity (40,000 x 3.605)
Present value of Rs 5,00,000 due at the end of 5 years, discounted 2,83,500
at 12%, 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 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)

(for understanding only)

Financial Liability Account

Year Debit Amount Credit Amount

1 To bank 40,000 By Bank 4,27,700

To bal c/f 4,39,024 By interest 51,324

2 To bank 40,000 By bal b/f 4,39,024

To bal c/f 4,51,707 By interest 52,683

3 To bank 40,000 By bal b/f 4,51,707

To bal c/f 4,66,100 By interest* 54,393

23. 2