Page 28 - 33. FR RTP NOV. 22

On 31st March, 20X3, the carrying amount of the loan receivable is Rs. 4,76,280.
As a result of that modification, on 31st March, 20X3, the present value of estimated cash flows is
recalculated to be Rs. 2,05,750 using the asset‖s original effective interest rate of 5% (Rs. 2,50,000 ÷

(1.05)4).
An impairment loss of Rs. 2,70,530 (Rs. 4,76,280 – Rs. 2,05,750) is recognised in profit or loss in the year
20X2-20X3.
The carrying amount of the loan receivable may be reduced directly, as follows:
Rs. Rs.
Profit or loss - impairment loss Dr. 2,70,530

To Loan receivable 2,70,530
(Being impairment loss recognised)
In this case, the loan receivable will be measured at Rs. 2,05,750 at 31st March, 20X3. The revised amortised
cost calculation at 1st April, 20X3 is as follows:
Period Carrying Interest at 5% (the Cash inflow Carrying amount
amount at original effective at
1st April interest rate) 31st March
20X3-20X4 2,05,750 10,288 – 2,16,038
20X4-20X5 2,16,038 10,802 – 2,26,840
20X5-20X6 2,26,840 11,342 – 2,38,182
20X6-20X7 2,38,182 11,818 (2,50,000) –

Solution 19
Investment property is property (land or a building—or part of a building—or both) held (by the owner or by

the lessee as a right-of-use asset) to earn rentals or for capital appreciation or both, rather than for:
a) use in the production or supply of goods or services or for administrative purposes; or

b) sale in the ordinary course of business.
Property mentioned in (a) above would be covered under Ind AS 16 ―Property, Plant and Equipment‖.
On applying the above provisions, Floor 1 of the building is classified as an item of investment property by the

entity (lessor) because it is held to earn rentals. Ind AS 40 is applicable in this case. An investment property
should be measured initially at its cost. After initial recognition, an entity shall measure all of its investment
properties in accordance with Ind AS 16‖s requirements for cost model. However, entities are required to
measure the fair value of investment property, for the purpose of disclosure even though they are required to
follow the cost model.
Floor 2 of the building will be classified as property, plant and equipment because it is held by administrative

staff i.e. it is held for use for administrative purposes. Ind AS 16 is applicable in this case. An item of
property, plant and equipment that qualifies for recognition as an asset should be initially measured at its
cost. After recognition, an entity shall choose either the cost model or the revaluation model as its accounting
policy and shall apply that policy to an entire class of property, plant and equipment.

Solution 20
Paragraph 41 of Ind AS 8, inter alia, states that financial statements do not comply with Ind AS if they

contain either material errors or immaterial errors made intentionally to achieve a particular presentation of an
entity‖s financial position, financial performance or cash flows.

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