Page 10 - 33. FR RTP NOV. 22

Ind AS 38

Question 12

An entity has an intangible asset in the form of a product protected by patented technology which is
expected to be a source of net cash inflows for at least 15 years. It has been recognised in the books on
initial date at Rs. 12,00,000. The entity has a commitment from a third party to purchase that patent in five
years for 60 per cent of the fair value of the patent at the date it was acquired, and the entity intends to

sell the patent in five years. Company is amortising the asset in 15 years considering its residual value to be
Zero. Annual amortization charged to Profit and Loss is Rs. 80,000. State, whether the accounting treatment
done by the Company is in accordance with Ind AS 38? If not, then calculate the annual amortization of the
intangible asset and also the amount at which it will be reflected in the balance sheet.

Ind AS 115

Question 13
A Ltd. owns 20 resorts across India. Every customer who stays in any of the resorts owned by A Ltd. is
entitled to get points on the basis of total amount paid by him. Under this scheme, 1 point is granted for
every Rs. 100 spent for stay in the resort. As per the past experience of A Ltd., the likelihood of exercise of

the points is 100% and the standalone price of each such point is Rs. 5. Customer X spends Rs. 10,000 in one
of the resorts of A Ltd. What is the accounting treatment for the points granted by A Ltd.?

Ind AS 105

Question 14

Company A has financial year ending 31st March, 20X0. On 1st June, 20X0, the Company has classified its
Division B as held for sale in accordance with Ind AS 105. How property, plant and equipment (PPE) for which
the company has adopted cost model shall be measured immediately before the classification as held for sale
on 1st June, 20X0?

Ind AS 37

Question 15
HVCL manufactures heavy equipment for construction industry. An order for supply of 90 equipment was

received from ABIL. The unit price of the equipment was agreed at Rs. 190 lakhs each. 64 equipment was
supplied during the year 20X1-20X2 and balance quantity remaining to be supplied as on 31.3.20X2. HVCL has
5 equipment in its inventory as on 31.3.20X2. HVCL considered that the contract was an onerous contract and
therefore, the net realisable value of inventory has been taken as value of inventory as on 31.3.20X2.
The management of HVCL contends that costs incurred towards administrative overheads, finance charges, R
& D expenses, sales overhead, head quarter expenditure etc., are considered as period cost and hence not

considered for creation of provision. Hence, the same have not been included in the computation of
unavoidable cost.
The management of HVCL has submitted the details of costs that have been considered for creation of
provision towards onerous contract:
o Material cost - includes cost of material procured, cost of freight & insurance incurred for material

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