Page 3 - 24. COMPILER QB - IND AS 24

shall disclose key management personnel compensation in total i.e. disclosure of directors’ fee of (Rs10,00,000
+ Rs7,50,000) Rs17,50,000 is to be made as employees benefits (under various categories).
Since short-term employee benefits are expected to be settled wholly before twelve months after the end of

the annual reporting period in which the employees render the related services, the sitting fee paid to directors
will fall under it (as per Ind AS 19) and is required to be disclosed in accordance with Ind AS 24.

Q2 (November 18, October 20 MTP – 5 Marks)

ABC Ltd. is a long-standing customer of XYZ Ltd. Mrs. P whose husband is a director in XYZ Ltd. purchased
a controlling interest in entity ABC Ltd. on 1st June, 2017. Sales of products from XYZ Ltd. to ABC Ltd. in
the two-month period from 1st April 2017 to 31st May 2017 totaled Rs8,00,000. Following the shares purchased

by Mrs. P, XYZ Ltd. began to supply the products at a discount of 20% to their normal selling price and
allowed ABC Ltd. three months’ credit (previously ABC Ltd. was only allowed one month’s credit, XYZ Ltd. 's
normal credit policy). Sales of products from XYZ Ltd. to ABC Ltd. in the ten-month period from 1st June
2017 to 31st March 2017 totaled Rs 60,00,000. On 31st March 2018, the trade receivables of XYZ Ltd. included
Rs18,00,000 in respect of amounts owing by ABC Ltd.
Analyse and show how the above event would be reported in the financial statements of XYZ Ltd. for the

year ended 31 March 2018 and mention the disclosure requirements also as per Ind AS.
SOLUTION

XYZ Ltd. would include the total revenue of Rs 68,00,000 (Rs 60,00,000 + Rs8,00,000) from ABC Ltd.
received / receivable in the year ended 31st March 2018 within its revenue and show Rs 18,00,000 within trade
receivables at 31st March 2018.
Mrs. P would be regarded as a related party of XYZ Ltd. because she is a close family member of one of the
key management personnel of XYZ Ltd. From 1st June 2017, ABC Ltd. would also be regarded as a related

party of XYZ Ltd. because from that date ABC Ltd. is an entity controlled by another related party.
Because ABC Ltd. is a related party with whom XYZ Ltd. has transactions, then XYZ Ltd. should disclose:
– The nature of the related party relationship.
– The revenue of Rs 60,00,000 from ABC Ltd. since 1st June 2017.
– The outstanding balance of Rs 18,00,000at 31st March 2018.

In the current circumstances it may well be necessary for XYZ Ltd. to also disclose the favourable terms
under which the transactions are carried out.

Q3 (November 18)

Mr. X, is the financial controller of ABC Ltd., a listed entity which prepares consolidated financial statements
in accordance with Ind AS. Mr. X has recently produced the final draft of the financial statements of ABC
st
Ltd. for the year ended 31 March, 2018 to the managing director for approval. Mr. Y, who is not an
accountant, had raised following queries from Mr. X after going through the draft financial statements:
One of the notes to the financial statements gives details of purchases made by ABC Ltd. from PQR Ltd.
during the period. Mr. Y own 100% of the shares in PQR Ltd. However, he feels that there is no requirement
for any disclosure to be made in ABC Ltd.’s financial statements since the transaction is carried out on
normal commercial terms and is totally insignificant to ABC Ltd., as it represents less than 1% of ABC Ltd.’s
purchases.

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