Page 60 - 23. COMPILER QB - IND AS 109_32

st
e. 31 March 2020-
Particulars Dr. Rs. Cr. Rs.

Bank A/c Dr. 2,10,000
To Interest income (profit and loss) @12% A/c 22,470
To Loan to employee A/c 1,87,530
(Being last instalment of repayment of loan accounted for using
the amortised cost and effective interest rate of 12%)
Employee benefit (profit and loss) A/c Dr. 20,916
To Pre- paid employee cost A/c 20,916
(Being amortization of pre- paid employee cost charged to profit
and loss as employee benefit cost)

Q.38 (January 21 – 5 Marks)

Jewels Ltd. entered into a transaction to purchase 1,000 gms of platinum on 15th January, 2020. The
transaction provides for a price payable which is equal to market value of 1,000 gms of platinum on 15th April
2020 and shall be settled by issue of such number of equity shares as is required to settle the
aforementioned transaction, at a price of Rs. 100 per share on 15th April 2020. Whether this is to be classified
as liability or equity as on 31st March 2020 as per Ind AS 109?

You are required to explain with reasons.
SOLUTION
There is a contract for purchase of 1,000 gms of platinum whose consideration varies in response to changing

value of platinum. Analysing this contract as a derivative with all three of the following characteristics:
(a) Value of contract changes in response to change in market value of platinum;
(b) There is no initial net investment
(c) It will be settled at a future date, i.e. 15th April 2020.

Since the above criteria are met, this is a derivative contract.
Now, a derivative contract that is settled in own equity other than exchange of fixed amount of cash for fixed
number of shares is classified as ‘liability’. In this case, since the contract results in the issue of variable
number of shares based on transaction on price to be determined in future, hence, this shall be classified as
‘derivative financial liability’ as per Ind AS 109.

Q.39 (July 21 – 14 Marks)
Softech Limited has a policy of providing subsidized loans to its employees for the purpose of buying or

construction of residential houses. Mrs. B is a Senior Manager in the Company. The Company granted a loan
to her on the following terms:
● Principal amount : Rs 25 lakh
● Interest rate: 4% for the first Rs 10 lakh and 7% for the next Rs 15 lakh
● Loan disbursed on: 1st January, 2019
● Tenure: 5 years
● Prepayment: Full or partial pre-payment at the option of the employee.

● The principal amount of loan shall be recovered in 5 equal installments and will be first applied to 7%

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