Page 27 - 33. FR RTP NOV. 22

Company P‖s earning for the period Rs. 7,000
Company P‖s share of Company S‖s earning Rs. 26,460
attributable to ordinary shares [(9,000 /10,000) x (2.94 x 10,000)]

Company P‖s share of Company S‖s earning attributable to options Rs. 294
[(500 /1,000) x (2.94 x 200)]
Company P‖s weighted average ordinary shares outstanding 5,000
Company P‖s diluted EPS = (7,000 + 26,460 + 294) / 5,000 Rs. 6.75
Working Note:

Computation of Incremental shares related to weighted average options outstanding:
All options are dilutive because their exercise price is below the average market price of Company
S‖s ordinary shares for the period.
The incremental shares are calculated as follows:

Shares issued on assumed exercise of options 1,000
Less: Shares that would be issued at average market Price [(40 x (800)
1,000)/50]
Incremental shares 200

Solution 18
As the loan is not at a market interest rate, hence it is not recorded at the transaction price of Rs. 5,00,000.

Instead, the entity measures the loan receivable at the present value of the future cash inflows discounted at
a market rate of interest available for a similar loan.
The present value of the loan receivable (financial asset) discounted at 5% per year is Rs. 5,00,000 ÷ (1.05)3
= Rs. 4,32,000. Therefore, Rs. 4,32,000 is recorded on initial measurement of the loan receivable. This amount
will accrete to Rs. 5,00,000 over the three-year term using the effective interest method.
The difference between Rs. 5,00,000 and Rs. 4,32,000 i.e., Rs. 68,000 is accounted for as prepaid employee

cost in accordance with Ind AS 19 ―Employee Benefits‖, which will be deferred and amortised over the period
of loan on straight line basis.
The journal entries on initial recognition are:
Rs. Rs.

Loan receivable (financial asset) Dr. 4,32,000
Prepaid employee cost (asset) Dr. 68,000

To Cash / Bank (financial asset)
5,00,000
(Being loan granted to the employee recognised)

The amortised cost calculation at 1st April, 20X1 is as follows:
Period Carrying amount Interest at Cash inflow Carrying
at 5% amount at
1st April 31st March
20X1-20X2 4,32,000 21,600 – 4,53,600
20X2-20X3 4,53,600 22,680 – 4,76,280
20X3-20X4 4,76,280 23,720* (5,00,000) –
*Difference of Rs. 94 (Rs. 23,814 – Rs. 23,720) is due to approximation.

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