Page 2 - 34.1 FR MARCH 22 MTP QP

MOCK TEST PAPER 1

FINAL COURSE: GROUP – I

PAPER – 1: FINANCIAL REPORTING

Question 1

(a) H Limited having net worth of Rs. 250 crores is required to adopt Ind AS from 1st April, 20X2 in

accordance with the Companies (Indian Accounting Standard) Rules 2015.
Mr. R, the senior manager, of H Ltd. has identified following issues which need specific attention of CFO so
that opening Ind AS balance sheet as on the date of transition can be prep ared:
Issue 1: As part of Property, Plant and Equipment, Company has elected to measure land at its fair value and

want to use this fair value as deemed cost on the date of transition. The carrying value of land as on the
date of transition was Rs. 5,00,000. The land was acquired for a consideration of Rs. 5,00,000. However, the
fair value of land as on the date of transition was Rs. 8,00,000.
Issue 2: Under Ind AS, the Company has designated mutual funds as investments at fair value through profit
or loss. The value of mutual funds as per previous GAAP was Rs. 4,00,000 (at cost). However, the fair value of
mutual funds as on the date of transition was Rs. 5,00,000.

Issue 3: Company had taken a loan from another entity. The loan carries an interest rate of 7% and it had
incurred certain transaction costs while obtaining the same. It was carried at cost on its initial recognition.
The principal amount is to be repaid in equal instalments over the period of loan. Interest is also payable at
each year end. The fair value of loan as on the date of transition is Rs. 1,80,000 as against the carrying
amount of loan which at present equals Rs. 2,00,000.

Issue 4: The company has declared dividend of Rs. 30,000 for last financial year. On the date of transition,
the declared dividend has already been deducted by the accountant from the company’s ‘Reserves & Surplus’
and the dividend payable has been grouped under ‘Provisions’. The dividend was only declared by board of
directors at that time, and it was not approved in the annual general meeting of shareholders. However,
subsequently when the meeting was held it was ratified by the shareholders.

Issue 5: The company had acquired intangible assets as t rademarks amounting to Rs. 2,50,000. The company
assumes to have indefinite life of these assets. The fair value of the intangible assets as on the date of
transition was Rs. 3,00,000. However, the company wants to carry the intangible assets at Rs. 2,50,000 only.
Issue 6: After consideration of possible effects as per Ind AS, the deferred tax impact is computed as Rs.
25,000. This amount will further increase the portion of deferred tax liability. There is no requirement to carry

out the separate calculation of deferred tax on account of Ind AS adjustments. Management wants to know
the impact of Ind AS in the financial statements of company for its general understanding.
Prepare Ind AS Impact Analysis Report (Extract) for H Limited for presentation to the management wherein
you are required to discuss the corresponding differences between Earlier IGAAP (AS) and Ind AS against each
identified issue and its impact there upon for preparation of transition date balance sheet. Also pass journal
entry for each of the issues mentioned above.

(b) The following information is available relating to Space India Limited for the Financial Year 20X1-20X2.
Net profit attributable to equity shareholders Rs. 90,000
Number of equity shares outstanding 16,000
Average fair value of one equity share during the year Rs. 90

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