Page 8 - 33. FR RTP NOV. 22

Ind AS 23

Question 8

Harish Construction Company is constructing a huge building project consisting of four phases. It is expected
that the full building will be constructed over several years but Phase I and Phase II of the building will be
operational as soon as they are completed.
Following is the detail of the work done on different phases of the building during the current year:

(Rs. in lakh)
Phase I Phase II Phase III Phase IV
Rs. Rs. Rs. Rs.
Cash expenditure 10 30 25 30
Building purchased 24 34 30 38
Total expenditure 34 64 55 68
Total expenditure of all phases 221
Loan taken @ 15% at the beginning 200
of the year
After taking substantial period of construction, at the mid of the current year, Phase I and Phase II have

become operational. Find out the total amount to be capitalized and to be expensed during the year.

Ind AS 103

Question 9

How should contingent consideration payable in relation to a business combination be accounted for on initial
recognition and at the subsequent measurement in the following cases:
(a) On 1st April 20X1, A Ltd. acquires 100% interest in B Ltd. As per the terms of agreement the purchase
consideration is payable in the following 2 tranches:
 an immediate issuance of 10 lakhs shares of A Ltd. having face value of

Rs. 10 per share;
 a further issuance of 2 lakhs shares after one year if the profit before interest and tax of B Ltd. for the
first year following acquisition exceeds Rs. 1 crore.
The fair value of the shares of A Ltd. on the date of acquisition is Rs. 20 per share. Further, the management
has estimated that on the date of acquisition, the fair value of contingent consideration is Rs. 25 lakhs.

During the year ended 31st March, 20X2, the profit before interest and tax of B Ltd. exceeded Rs. 1 crore. As
on 31st March, 20X2, the fair value of shares of A Ltd. Is Rs. 25 per share.

(b) Continuing with the fact pattern in (a) above except for:
 The number of shares to be issued after one year is not fixed.
 Rather, A Ltd. agreed to issue variable number of shares having a fair value equal to Rs. 40 lakhs after

one year, if the profit before interest and tax for the first year following acquisition exceeds Rs. 1 crore.

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