Page 4 - 23. COMPILER QB - IND AS 109_32

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

Value @ 9%
12%
Rs Rs Rs

Liability component
Present value of 2 remaining yearly 67,600 70,360
interest payments of Rs 40,000, discounted

at 12% and 9%, respectively
Present value of Rs 5,00,000 due in 2 3,98,500 4,21,000
years, discounted at 12% and 9%,

compounded yearly, respectively
Liability component 4,66,100 4,91,360 (25,260) increase in liab
Equity component 72,300 33,640* 38,660 decrease in equity

(5,25,000 –
4,91,360)

Total 5,38,400 5,25,000 13,40

Note - FV on date of modification = 5,25,000 (given). Do not take 5,00,000

Journal Entries
Rs. Rs.
8% Debentures (Liability component) Dr. 4,66,100
Profit and loss A/c (Debt settlement expense) Dr. 25,260 4,91,360

To Bank A/c
(Being the repurchase of the liability component recognised)

8% Debentures (Equity component) Dr. 72,300
To Bank A/c 33,640
To Reserves and Surplus A/c 38,660
(Being the cash paid for the equity component recognised)

Entries for Year 3 (after modification)
1. P/L Dr. 25,260
To Financial Liability 25,260

2. 8% Debentures Dr 38,660
To General Reserve 38,660

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