Page 70 - 23. COMPILER QB - IND AS 109_32

In the Consolidated Financial Statements (CFS), the loan and interest income/expense will get knocked-off as
intra-group transactions in all three scenarios. Hence the above accounting will not have any impact on the
CFS. However, if the loan is in foreign currency, exchange differences will continue to impact the statement of

profit and loss in accordance with the requirements of Ind AS 21.

Q44. (December 21 – 5 Marks)

M Limited has made a Security Deposit whose details are given below:
Particulars Details

Date of Security Deposit (Starting Date) April 01, 2016
Date of Security Deposit (Finishing Date) March 31, 2021
Description Lease

Total Lease Period S Years
Security Deposit Rs. 20,00,000
Present Value Factor at the 5" year 0.6499

Determine how the above Financial Asset should be measured and briefly explain the measurement determined
as such. Make necessary Journal Entries for accounting of the Security Deposit in the First Year and Last
Year. Assume the market rate for a deposit for a similar period to be 9% P.A.
SOLUTION

The above security deposit is an interest free deposit redeemable at the end of lease term for Rs. 20,00,000.

Hence this involves collection of contractual cash flows at specified date and not able to sale in the market
hence will be categorized under “Amortised Cost”.

Journal Entry:
At beg. Security Deposit a/c Dr. 12,99,800

Prepaid Lease Exp A/c Dr. 7,00,200
To Bank A/c 20,00,000

st
At the end of 1 Year:
Security deposit a/c Dr. 1,16,982
To Interest income a/c 1,16,982

Prepaid lease expense shall be amortised over the life of lease term on SLM basis unless any other approach is

reasonable.
Rent Expense a/c Dr. 1,40,040

To Prepaid Expense a/c 1,40,040

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