FINAL –FR

TEST-1:- INTRODUCTION , SCHEDULE-3,IND AS-1, IND AS-116

Duration:- 1 Hour Total Marks:-40
Question 1:- (6 Marks)
Mr. Unique commenced business on 01/04/17 with Rs. 20,000 represented by 5,000
units of the product @ Rs. 4 per unit, During the year 2017-18, he sold 5,000 units @ Rs.
5 per unit. During 2017-18, he withdraw Rs. 4.000.
 31/03/18: Price of the product @ Rs. 4.60 per unit
 Average price indices: 1/4/17: 100 & 31/3/18: 120
Find Out:
(i) Financial capital maintenance at Historical Cost
(ii) Financial capital maintenance at Current Purchasing Power
(iii) Physical Capital Maintenance

Question 2:- (5 Marks)

Company A has taken a long term loan arrangement from Company B. In the month of
December 20X1, there has been a breach of material provision of the arrangement. As a
consequence of which the loan becomes payable on demand on March 31, 20X2. In the
month of May 20X2, the Company started negotiation with the Company B for not to
demand payment as a consequence of the breach. The financial statements were
approved for the issue in the month of June 20X2. In the month of July 20X2, both
company agreed that the payment will not be demanded immediately as a consequence
of breach of material provision.
Advise on the classification of the liability as current/non –current.

Question 3:- (5 Marks)

Mike Ltd. has undertaken following various transactions in the financial year ended
31.03.2018:
(Rs.)
(a) Remeasurement of defined benefit plans 1,54,200
(b) Current service cost 1,05,000
(c) Changes in revaluation surplus 75,000
(d) Gains and losses arising from translating the monetary assets in 45,000
foreign currency
(e) Gains and losses arising from translating the financial 39,000
 statements of a foreign operation
(f) Gains and losses arising from investments in equity instruments 60,000
designated at fair value through other comprehensive income
(g) Income tax expenses 21,000
(h) Share bases payments cost 2,01,000
Identify and present the transactions in the financial statements as per Ind AS 1.

Question 4:- (8 Marks)

Entity W entered into a contract for lease of retail store with Entity J on January
01/01/2017. The initial term of the lease is 5 years with a renewal option of further 3
years. The annual payments for initial term and renewal term is Rs.100,000 and
Rs.110,000 respectively. The annual lease payment will increase based on the annual
increase in the CPI at the end of the preceding year. For example, the payment due on
01/01/18 will be based on the CPI available at 31/12/17.
Entity W’s incremental borrowing rate at the lease inception date and as at 01/01/2020
is 5% and 6% respectively and the CPI at lease commencement date and as at
01/01/2020 is 120 and 125 respectively.
At the lease commencement date, Entity W did not have a significant economic
incentive to exercise the renewal option. In the first quarter of 2020, Entity W installed
unique lease improvements into the retail store with an estimated five-year economic
life. Entity W determined that it would only recover the cost of the improvements if it
exercises the renewal option, creating a significant economic incentive to extend.
Is Entity W required to remeasure the lease in the first quarter of 2020?

Question 5:- (16 Marks)

Following is the financial statements of Arish Ltd. prepared on the basis of Accounting
Standards:
(Note all figures are in INR million)
Balance Sheet
Particulars Note As at 31st March, 2018
EQUITY AND LIABILITIES
Shareholders' funds
Share capital (shares of Rs.10 each) 1,000
Reserves and surplus 1 2,000
Non-current liabilities
Long-term borrowings 2 5,555
Deferred tax liabilities 3 200
Current liabilities
Trade payables 300
Short-term provisions 250
Other current liabilities 4 150
TOTAL 9,455
ASSETS
Non - current assets
Fixed Assets 5,655
Deferred Tax Assets 3 500
Current assets
Inventories 1,000
Trade receivables 5 1,100
Cash and bank balances 1,200
TOTAL 9,455
Note 1: The Company has achieved a major breakthrough in its consultancy services in
Middle East following which it has entered into a contract of rendering services with
Finland Inc for INR 6 billion during the year. The termination clause of the contract is
equivalent to INR 7 Million and is payable in case transition time schedule is missed
from 15th December 2022. The management however is of the view that the liability
cannot be treated as onerous.
Note 2: The Company is not able to assess the final liability for a particular tax
assessment pertaining to assessment year 2018-2019 wherein it has received a demand
notice of INR 6 Million. However, the company is contesting the same with CIT (Appeals)
as on the reporting date.
Statement of Profit & Loss
Particulars Note Year ended
March 31, 2018
Revenue from operations 5,500
Expenses
Employee Benefit Expense 1,200
Operating Costs 2,200
 Depreciation 999
Total Expenses 4,399
Profit before tax 1,101
Tax Expense (150)
Profit after tax 951
Notes to Accounts:
Note 1: Reserves and surplus (INR in millions)
Capital Reserve 500
Surplus from P & L
Opening Balance 49
Additions 951 1,000
Reserve for foreseeable loss 500
Total 2,000
Note 2: Long Term Borrowings
Term Loan from Bank 5,555
Total 5,555
Note 3: Deferred Tax
Deferred Tax Asset 500
Deferred Tax Liability (200)
Total 300
Note 4: Other Current Liabilities
Unclaimed dividends 3
Billing in Advance 147
Total 150
Note 5: Trade Receivables
Considered good (outstanding within 6 months) 1,065
Considered doubtful (due from past 1 year) 40
Provision for doubtful debts (5)
Total 1,100
Additional Information:
(a) Share capital comprises of 100 million shares of INR 10 each
(b) Term Loan from bank for INR 5555 million also includes interest accrued and due
of INR 555 million as on the reporting date.
(c) Reserve for foreseeable loss is created against a service contract due within 6
months. Required:
(i) Evaluate and report the errors and misstatements in the above extracts; and
(ii) Prepare the corrected Balance Sheet & Statement of Profit and Loss