Page 17 - 34.2 FR MARCH 22 MTP ANSWER

current carrying value of the loan. As per requirements of Ind AS 109, any change of more than 10% shall be
considered a substantial modification, resulting in fresh accounting for the new loan:
Date Cash flows Interest outflow Discount PV of cash
(principal) @15% factor flows

31 Mar 20X3 (400,000,000)
31 Mar 20X4 40,000,000 60,000,000 0.8969 89,686,099
31 Mar 20X5 40,000,000 54,000,000 0.8044 75,609,805
31 Mar 20X6 40,000,000 48,000,000 0.7214 63,483,092
31 Mar 20X7 40,000,000 42,000,000 0.6470 53,053,542
31 Mar 20X8 40,000,000 36,000,000 0.5803 44,100,068
31 Mar 20X9 40,000,000 30,000,000 0.5204 36,429,133
31 Mar 20Y0 40,000,000 24,000,000 0.4667 29,871,422
31 Mar 20Y1 40,000,000 18,000,000 0.4186 24,278,903
31 Mar 20Y2 40,000,000 12,000,000 0.3754 19,522,235
31 Mar 20Y3 40,000,000 6,000,000 0.3367 15,488,493
Present Value (PV) of new contractual cash flows discounted at 11.50% 451,522,791
Carrying amount of loan 397,489,650
Difference 54,033,141

Percentage of carrying amount 13.59%
Note: Calculation above done on full decimal, though in the table discount factor is limited to 4 decimals.
Considering a more than 10% change in PV of cash flows compared to the carrying value of the loan, the
existing loan shall be considered to have been extinguished and the new loan shall be accounted for as a
separate financial liability. The accounting entries for the same are included below:

d. 31st March, 20X3 – Accounting for extinguishment

Particulars Dr. Amount Cr. Amount
(Rs.) (Rs.)
Loan from bank (old) A/c Dr. 397,489,650
Finance cost (profit and loss) Dr. 2,510,350
To Loan from bank (new) A/c 400,000,000
(Being new loan accounted for at its principal amount
in absence of any transaction costs directly related to
such loan and correspondingly a de-recognition of
existing loan)

e. 31st March, 20X4
Particulars Dr. Amount Cr. Amount
(Rs.) (Rs.)
Loan from bank A/c Dr. 40,000,000
Interest expense (profit and loss) Dr. 60,000,000
To Bank A/c 100,000,000
(Being first instalment of the new loan and
payment of interest accounted for as an adjustment
to the amortised cost of loan)

34.23