CA Final – Financial Reporting Test Series

CA Final - Financial Reporting

(Test on IND AS 36 & 105)
(FRWITHAK)

Total - 30 Marks
Time Allotted – 1 Hr

Important Points:
1. There is no use of just referring the question paper to check whether it is manageable.
Everything feels manageable until you solve it

2. Try to Complete the Question Paper within the given time limit

3. Read the question carefully and see what is asked in the question. Give Reference of IND AS
& Concept wherever you feel necessary

4. You are not required to match your answer word to word with ICAI. You can answer in your
own words alongwith keywords and appropriate working.

5. Don’t refer the solution of any question until you have completed the paper

6. Its fine if you are not able to recall few points. Solve how much you can & after test is over do
self evaluation and mark the areas which you were not able to recall.

BEST OF LUCK GUYS

#FRwithAK

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 CA Final – Financial Reporting Test Series
Question 1 (8 Marks)
On 1stApril 20X1, Venus ltd acquired 100% of Saturn ltd for ₹4,00,000. The fair value of the net identifiable
assets of Saturn ltd was ₹3,20,000 and goodwill was ₹80,000. Saturn ltd is in coal mining business. On 31 st
March, 20X3 the government has cancelled licenses given to it in few states.
As a result, Saturn’s ltd revenue is estimated to get reduce by 30%. The adverse change in market place
and regulatory conditions is an indicator of impairment. As a result, Venus ltd has to estimate the
recoverable amount of goodwill and net assets of Saturn Ltd. on 31st March, 20X3.
Venus ltd uses straight line depreciation. The useful life of Saturn’s ltd assets is estimated to be 20 years
with no residual value. No independent cash inflows can be identified to any individual assets. So the entire
operation of Saturn ltd is to be treated as a CGU. Due to the regulatory entangle it is not possible to
determine the selling price of Saturn ltd as a CGU. Its value in use is estimated by the management at
₹2,12,000.
Suppose by 31st March, 20X5 the government reinstates the licenses of Saturn Ltd. The management
expects a favourable change in net cash flows. This is an indicator that an impairment loss may have
reversed. The recoverable amount of Saturn’s ltd net asset is re- estimated. The value in use is expected to
be ₹3,04,000 and net selling price is expected to be ₹2,90,000.
Calculate the impairment loss, if any. Also show the accounting treatment for reversal of impairment loss
and the subsequent depreciation thereon.

Question 2 (8 Marks)
ABC Ltd. has three cash-generating units: A, B and C, the carrying amounts of which as on March 31,
20X1 are as follows:

(₹ in crore)
Cash-generating units Carrying amount Remaining useful life

A 500 10
B 750 20
C 1,100 20

ABC Ltd. also has two corporate assets having a remaining useful life of 20 years.

(₹ in crore)

Corporate asset Carrying amount Remarks

X 600 The carrying amount of X can be allocated on a

reasonable basis (i.e., pro rata basis) to the cash-
generating units.

200 The carrying amount of Y cannot be allocated on a

Y
reasonable basis to the individual cash- generating
units.

Recoverable amount as on March 31, 20X1 is as follows:

Cash-generating units Recoverable amount

(₹ in crore)

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 CA Final – Financial Reporting Test Series
A 600
B 900
C 1,400
ABC Ltd. 3,200

Calculate the impairment loss, if any. Ignore decimals.

Question 3 (6 Marks)
S Ltd purchased a property for ₹6,00,000 on 1st April, 20X1. The useful life of the property is 15 years. On
31st March, 20X3, S Ltd classified the property as held for sale. The impairment testing provides the
estimated recoverable amount of ₹4,70,000.
The fair value less cost to sell on 31st March, 20X3 was ₹4,60,000. On 31st March, 20X4 management
changed the plan, as property no longer met the criteria of held for sale. The recoverable amount as at 31st
March, 20X4 is ₹5,00,000.
Provide the accounting treatment of events for the year ending 31st March, 20X3 and 31st
March, 20X4 and value the property at the end of 20X3 and 20X4

Question 4 - (8 Marks)
On June 1, 20X1, entity X plans to sell a group of assets and liabilities, which is classified as a disposal
group. On July 31, 20X1, the Board of Directors approves and becomes committed to the plan to sell the
manufacturing unit by entering into a firm purchase commitment with entity Y. However, since the
manufacturing unit is regulated, the approval from the regulator is needed for sale. The approval from the
regulator is customary and highly probable to be received by November 30, 20X1 and the sale is expected
to be completed by March 31, 20X2. Entity X follows December year end. The assets and liabilities
attributable to this manufacturing unit are as under:
(Amount in ₹)

Particulars Carrying value as on Carrying value as on

December 31, 20X0 July 31, 20X1

Goodwill 500 500

Plant and Machinery 1,000 900
Building 2,000 1,850
Debtors 850 1,050
Inventory 700 400
Creditors (300) (250)
Loans (2,000) (1,850)
2,750 2,600

The fair value of the manufacturing unit as on December 31, 20X0 is ₹2,000 and as on July 31, 20X1 is
₹1,850. The cost to sell is 100 on both these dates. The disposal group is not sold at the period end i.e.,
December 31, 20X1. The fair value as on December 31, 20X1 is lower than the carrying value of the
disposal group as on that date.
Required:

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 CA Final – Financial Reporting Test Series
1. Assess whether the manufacturing unit can be classified as held for sale and reasons there for. If
yes, then at which date?
2. The measurement of the manufacturing unit as on the date of classification as held for sale.
3. The measurement of the manufacturing unit as at the end of the year.

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