Page 63 - 23. COMPILER QB - IND AS 109_32

On 31st December 2020, due to pre-payment of a part of loan by Mrs. B, 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 31st December 2020, first the realisation of the contractual

cash flow as shown in (c) below and then the accounting for the pre-payment of Rs 5,00,000 included in (d)
below:
c. 31st December 2020
Particulars Dr. (Rs) Cr. (Rs)
Bank A/c Dr. 6,10,000
To Interest income (profit and loss) @ 12% A/c 2,06,146
To Loan to Mrs. B A/c 4,03,854
(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 Dr. 78,057
To Pre-paid employee cost A/c 78,057
(Being amortization of pre-paid employee cost charged
to profit and loss as employee benefit cost)

Computation of new carrying value of loan to Mrs. B:

Inflows
Date Principal Interest Interest Discount PV
income income factor @
7% 4% 12%
31st December 2021 5,00,000 - 40,000 0.8929 4,82,166
31st December 2022 5,00,000 - 20,000 0.7972 4,14,544

Total (revised carrying value) 8,96,710
Less: Current carrying value (13,14,028)
Adjustment required 4,17,318

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 pre-paid employee cost, which shall be amortised over the
remaining tenure of the loan.
d. 31st December 2020 prepayment
Particulars Dr. (Rs) Cr. (Rs)

Bank A/c Dr. 5,00,000
To Pre-paid employee cost A/c To Loan to Mrs. B A/c 82,682
(Being gain to Softech Limited recorded as an adjustment to 4,17,318
pre-paid employee cost)

Amortisation of employee benefit cost shall be as follows:
Date Opening Amortised Adjustment Closing
Balance to P&L Balance
1st January 2019 3,90,284 3,90,284
31st December 2019 3,90,284 78,057 3,12,227
82,682
31st December 2020 3,12,227 78,057 1,51,488
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