Page 58 - 23. COMPILER QB - IND AS 109_32

Inflows
Date Principal Interest Interest Total inflow Discount PV
income income Factor @
8% 5% 12%

31.03.2018 3,00,000 48,000 15,000 3,63,000 0.893 3,24,159
31.03.2019 3,00,000 24,000 15,000 3,39,000 0.797 2,70,183
31.03.2020 3,00,000 - 15,000 3,15,000 0.712 2,24,280
Total (fair value) 8,18,622

Benefit to Simran, to be considered as part of employee cost for Lovely Ltd. Rs 81,378 (9,00,000 – 8,18,622).
The deemed employee cost is to be amortised over the period of loan i.e. the minimum period that Simran
must remain in service.
The amortization schedule of the Rs. 8,18,622 loan is shown in the following table:
Amount in Rs.

Date Opening Total cash inflows Interest Closing
outstanding (principal repayment + @ 12% outstanding
Loan interest Loan
01.04.2017 8,18,622 8,18,622
31.03.2018 8,18,622 3,63,000 98,235 5,53,857
31.03.2019 5,53,857 3,39,000 66,463 2,81,320
31.03.2020 2,81,320 3,15,000 33,680* Nil
* Difference is due to an approximation of the discounting factor and interest amount.
Journal Entries to be recorded at every period end:
a. 1 April 2017 –

Particulars Dr. (Rs.) Cr. (Rs.) Remarks
Loan to employee A/c Dr. 8,18,622 financial asset
Pre-paid employees cost A/c Dr. 81,378 deferred
To Bank A/c 9,00,000 payment
(Being loan asset recorded at initial fair value)

b. 31 March 2018 –
Particulars Dr. (Rs.) Cr. (Rs.)
Bank A/c Dr. 3,63,000
To Interest income A/c 98,235
To Loan to employee A/c 2,64,765
(Being first instalment of repayment of loan
accounted for using the amortised cost and effective interest
rate of 12%)
Employee benefit A/c Dr. 27,126
To Pre-paid employee cost A/c 27,126
(Being amortization of pre-paid employee cost
charged to profit and loss as employee benefit cost on straight
line basis)

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