Page 22 - 35. FR APRIL 22 MTP QP ANSWERS

Therefore, unrealised forex gain will be recorded in standalone profit and loss by ` 24 lacs. (i.e. (`
85 - ` 83) x 12 Lacs)

Journal Entries
` (in Lacs) ` (in Lacs)
G Ltd. Dr. 996

To Sales 996
(Being revenue recorded on initial recognition)
G Ltd. Dr. 24
To Foreign exchange difference (unrealised) 24

(Being foreign exchange difference recorded at year end)
Accounting treatment in the books of G Ltd. (Functional currency EURO)
G Ltd. will recognize inventory on 1st February, 20X1 of Euro 12 lacs which will also be its closing stock at
year end.

Journal Entry

(in Euros) (in Euros)
Purchase Dr. 12 lakh

To M Ltd. 12 lakh
Accounting treatment in the consolidated financial statements
Receivable and payable in respect of above-mentioned sale / purchase between M Ltd. and G Ltd. will get
eliminated.
The closing stock of G Ltd. will be recorded at lower of cost or NRV.

Euro (in lacs) Rate ` (in lacs)
Cost 12 83 996
NRV (Assumed Same) 12 85 1020
Since cost is less than NRV, no write off in the value of inventory is required. The amount of

closing stock of ` 996 lacs includes two components–
 Cost of inventory for ` 830 lacs; and
 Profit element of ` 166 lacs; and
At the time of consolidation, the second element amounting to ` 166 lacs will be eliminated from
the closing stock.
Journal Entry

` (in Lacs) ` (in Lacs)
Consolidated P&L A/c ‘ Dr. 166

To Inventory 166
(Being profit element of intragroup transaction. eliminated)

(c) Para 9 of Ind AS 36 ‘Impairment of Assets’ states that an entity shall assess at the end of each
reporting period whether there is any indication that an asset may be impaired. If any such indication

exists, the entity shall estimate the recoverable amount of the asset.
Further, paragraph 10(b) of Ind AS 36 states that irrespective of whether there is any indication

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