Page 4 - 35. FR APRIL 22 MTP QP ANSWERS

6. Depreciation amounts for coating and others are Rs. 10,00,00,000 and Rs. 3,00,00,000 respectively.
7. Capital expenditure for coating and others are Rs. 50,00,00,000 and Rs. 20,00,00,000 respectively.
8. Revenue from outside India is Rs. 6,20,00,00,000 and segment asset outside India Rs. 1,00,00,00,000.

Based on the above information, how X Ltd. would disclose information about reportable segment revenue,
profit or loss, assets and liabilities for financial year 20X1 -20X2?

Question 3

(a) Two parties structure a joint arrangement in an incorporated entity i.e. Entity A in which each party has
a 50% ownership interest. The purpose of the arrangement is to manufacture materials required by the
parties for their own, individual manufacturing processes. The arrangement ensures that the parties
operate the facility that produces the materials to the quantity and quality specifications of the parties.
The legal form of Entity A (an incorporated entity) through which the activities are conducted initially
indicates that the assets and liabilities held in Entity A are the assets and liabilities of Entity A. The

contractual arrangement between the parties does not specify that the parties have rights to the assets
or obligations for the liabilities of Entity A. There are following other relevant facts and circumstances
applicable in this case:
 The parties agreed to purchase all the output produced by Entity A in a ratio of 50:50. Entity A cannot
sell any of the output to third parties, unless this is approved by the two parties to the arrangement.

Because the purpose of the arrangement is to provide the parties with output they require, such sales to
third parties are expected to be uncommon and not material.
 The price of the output sold to the parties is set by both parties at a level that is designed to cover the
costs of production and administrative expenses incurred by Entity A. Based on this operating model, the
arrangement is intended to operate at a break-even level.
Based on the above fact pattern, determine whether the arrangement is a joint operation or a joint venture?

Will your conclusion change in case Entity A sells all its output to third parties instead of its owners? (INDAS
111)

(b) On 1st April, 20X1, Star Limited has advanced a housing loan of Rs. 15 lakh to one of its employees at an

interest rate of 6% per annum which is repayable in 5 equal annual installments along with interest at
each year end. Employee is not required to give any specific performance against this benefit. The market
rate of similar loan for housing finance by banks is 10% per annum.
The accountant of the company has recognized the staff loan in the balance sheet equivalent to the amount
of housing loan disbursed i.e. Rs. 15 lakh. The interest income for the year is recognized at the contracted
rate in the Statement of Profit and Loss by the company i.e. Rs. 90,000 (6% of Rs. 15 lakh).

Analyze whether the above accounting treatment made by the accountant is in compliance with the relevant
Ind AS. If not, advise the correct treatment of housing loan, interest and other expenses in the financial
statements of Star Limited for the year 20X1 -20X2 along with workings and applicable Ind AS.
You are required to explain how the housing loan should be reflected in the Ind AS compliant Balance Sheet
of Star Limited on 31st March, 20X2. Ignore defer tax impact (INDAS 109)

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