Page 59 - 23. COMPILER QB - IND AS 109_32

c. On 31 March 2019, due to prepayment of a part of loan by Simran, the carrying value of the loan shall be
re-computed by discounting the future remaining cash flows by the original effective interest rate.
There shall be two sets of accounting entries on 31 March 2019, first the realisation of the contractual

cash flow as shown below and then the accounting for the pre-payment of Rs. 1,00,000 included in (d)
below:
31 March 2019 –
Particulars Dr. (Rs.) Cr. (Rs.)
Bank A/c 3,39,000
To Interest income A/c 66,463
To Loan to employee A/c 2,72,537
(Being second instalment of repayment of loan
accounted for using the amortised cost and effective interest
rate of 12%)
Employee benefit (profit and loss) A/c 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)

Computation of new carrying value of loan to employee:

Date Principal Interest Interest Discount factor PV
income 8% income 5% @12%
31.03.2020 200,000 - 10,000 0.893 1,87,530
Total (revised carrying value) 1,87,530
Less: Current carrying value (2,81,320)
Adjustment required 93,790

The difference between the amount of pre-payment and adjustment to loan shall be considered a gain, though
will be recorded as an adjustment to prepaid employee cost, which shall be amortised over the remaining

tenure of the loan.

st
d. 31 March 2019 prepayment-
Dr. Rs. Cr. Rs.
Bank A/c Dr. 1,00,000
To Pre-paid employee cost A/c 6,210
To Loan to employee 93,790
(Being gain to lovely Limited recorded as an adjustment to pre-
paid employee cost)

Amortisation of employee benefit cost shall be as follows:

Date Opening Balance Amortised to P & L Adjustment Closing balance
01.04.2017 81,378 81378
81,378 27,126 54,252
54,252 27,126 6,210 20,916
20,916 20,916 Nil
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