Test Series: April, 2019

MOCK TEST PAPER 2

FINAL (NEW) COURSE
PAPER 1: FINANCIAL REPORTING
ANSWERS
1. Consolidated Balance Sheet of P Ltd as on 1st April, 20X2 (Rs. in Lakhs)
Amount
Assets
Non-Current Assets:
Property, plant and equipment 650
Investment 500
Current assets:
Inventories 400
Financial assets:
Trade receivables 750
Cash and cash equivalents 300
Others 630
Total 3,230
Equity and Liabilities
Equity
Share capital- Equity shares of Rs. 100 each 514
Other Equity 1128.62
NCI 154.95
Non-Current liabilities:
Long term borrowings 450
Long term provisions (50+70+28.93) 148.93
Deferred tax 28.5
Current Liabilities:
Short term borrowings 250
Trade payables 550
Provision for Law suit damages 5
Total 3230

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 Notes:
a. Fair value adjustment- As per Ind AS 103, the acquirer is required to record the assets
and liabilities at their respective fair value. Accordingly, the PPE will be recorded at
Rs. 350 lakhs.
b. The value of replacement award is allocated between consideration transferred and post
combination expense. The portion attributable to purchase consideration is determined
based on the fair value of the replacement award for the service rendered till the date of
the acquisition. Accordingly, 2.5 (5 x 2/4) is considered as a part of purchase
consideration and is credited to P Ltd equity as this will be settled in its own equity. The
balance of 2.5 will be recorded as employee expense in the books of D Ltd. over the
remaining life, which is 1 year in this scenario.
c. There is a difference between contingent consideration and deferred consideration. In
the given case 35 is the minimum payment to be paid after 2 years and accordingly will
be considered as deferred consideration. The other element is if company meet certain
target then they will get 25% of that or 35 whichever is higher. In the given case since
the minimum what is expected to be paid the fair value of the contingent consideration
has been considered as zero. The impact of time value on deferred consideration has
been given @ 10%.
d. The additional consideration of Rs. 20 lakhs to be paid to the founder shareholder is
contingent to him/her continuing in employment and hence this will be considered as
employee compensation and will be recorded as post combination expenses in the income
statement of D Ltd.
Working for Purchase consideration Rs. in lakhs
Particulars Amount
Share capital of D Ltd 400
Number of shares 4,00,000
Shares to be issued 2:1 2,00,000
Fair value per share 40
PC (2,00,000 x 70% x Rs. 40 per share) (A) 56.00
Deferred consideration after discounting Rs. 35 lakhs for 2
years @ 10% (B) 28.93
Replacement award Market based measure of the acquiree
award (5) x ratio of the portion of the vesting period completed
(2) / greater of the total vesting period (3) or the original
vesting period (4) of the acquiree award ie (5 x 2 / 4) (C) 2.50
PC in lakhs (A+B+C) 87.43

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 Purchase price allocation workings
Particulars Book value Fair value FV adjustment
(A) (B) (A-B)
Property, plant and equipment 500 350 (150)
Investment 100 100 -
Inventories 150 150 -
Financial assets: -
Trade receivables 300 300 -
Cash and cash equivalents 100 100 -
Others 230 230
Less: Long term borrowings (200) (200) -
Long term provisions (70) (70) -
Deferred tax (35) (35) -
Short term borrowings (150) (150) -
Trade payables (300) (300) -
Contingent liability - (5) (5)
Net assets (X) 625 470 (155)
Deferred tax Asset on FV adjustment 46.50 155
(155 x 30%) (Y)
Net assets (X+Y) 516.5
Non-controlling interest (516.50 x 30%) 154.95
rounded off
Capital Reserve 274.12
(Net assets – NCI – PC)
Purchase consideration (PC) 87.43
Consolidation workings
P Ltd. D Ltd. (pre- PPA Total
acquisition Allocation
)
Assets
Non-Current Assets:
Property, plant and equipment 300 500 (150) 650
Investment 400 100 500

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 Current assets:
Inventories 250 150 400
Financial assets:
Trade receivables 450 300 750
Cash and cash equivalents 200 100 300
Others 400 230 630
Total 2,000 1,380 (150) 3,230
Equity and Liabilities
Equity
Share capital- Equity shares 500
of
Rs. 100 each
Shares allotted to D Ltd.
(2,00,000 x 70% x Rs. 10 per 14 514
share)
Other Equity 810 318.62 1128.62
Non-controlling interest 0 154.95 154.95
Non-Current liabilities:
Long term borrowings 250 200 450
Long term provisions 50 70 28.93 148.93
Deferred tax 40 35 (46.5) 28.5
Current Liabilities:
Short term borrowings 100 150 250
Trade payable 250 300 0 550
Liability for lawsuit damages 5 5
Total 2,000 755 475 3,230
Other Equity
Other Equity 810 810
Replacement award 2.5 2.5
Security Premium Reserve
(2,00,000 shares x 70% x Rs.30) 42 42
Capital Reserve 274.12 274.12
810 318.62 1,128.62
2. (a) Statement of Profit and Loss
Rs. ’000
Operating lease rental (260)

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 Amortisation of asset leased on finance lease (225)
Finance cost relating to finance leases (248·4)

Balance Sheet
Rs. ’000
Property, plant and equipment 4,275

Prepaid operating lease rentals:

In non-current assets 1,080
In current assets 60
Lease liability:
In non-current liabilities (2,592·1)
In current liabilities (56·3)

Explanation and supporting calculations:

Separate decisions are made for the land and buildings elements of the lease.
1) The land lease is an operating lease because land has an indefinite useful economic
life and the lease term is 20 years.
The lease premium and annual rentals are apportioned 40% (3/7·5) to the land
element.
Therefore, the premium for the land element is Rs. 12,00,000 (Rs. 30,00,000 x 40%)
and the annual rentals for the land element Rs. 200,000 (Rs. 500,000 x 40%). This
makes the total lease payments Rs. 52,00,000 (Rs. 12,00,000 + 20 x Rs. 200,000).
The rental expense for the current period is Rs. 2,60,000 (Rs. 52,00,000 x 1/20).
The amount paid in the current period regarding the land element is Rs. 14,00,000
(Rs. 12,00,000 + Rs. 200,000). Therefore, there is a prepayment of Rs. 1,140,000
(Rs. 14,00,000 – Rs. 2,60,000) at the year end.
In the next 19 periods, the rental expense will be Rs. 260,000 and the rental payment
will be Rs. 200,000. Therefore Rs. 60,000 of the rental prepayment will reverse in each
period. This means that Rs. 60,000 of the prepayment will be a current asset, and the
balance a non-current asset.
2) The buildings element of the lease will be a finance lease because the lease term
is for substantially all of the useful life of the buildings.
The premium apportioned to the buildings element is Rs. 18,00,000 (Rs. 30,00,000 x
60%) and the annual rental apportioned to the buildings is Rs. 300,000 (Rs. 500,000
x 60%).

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 The initial carrying value of the leased asset in PPE is Rs. 45,00,000 (Rs. 18,00,000
+ Rs. 300,000 x 9).
Therefore, the annual depreciation charge is Rs. 2,25,000 (Rs. 45,00,000 x 1/20) and
the closing PPE = Rs. 42,75,000 (Rs. 45,00,000 – Rs. 2,25,000).
The finance cost in respect of the finance lease and the closing non-current liability is
shown in the working below.
The closing current liability is Rs. 56,300 (Rs. 26,48,400 – Rs. 25,92,100).
Lease liability profile – working
Year ended Bal b/f Finance Cost Lease rental Bal c/f
31st March @ 9.2% payment
Rs.’000 Rs. ’000 Rs. ’000 Rs. ’000
2018 *2,700 248·4 (300) 2,648·4
2019 2,648·4 243·7 (300) 2,592·1
* Balance brought forward is equal to net of lease premium of Rs. 18,00,000 ie.
Rs. 45,00,000 – Rs. 18,00,000 = Rs. 27,00,000.

(b) The above treatment needs to be examined in the light of the provisions given in
Ind AS 10 ‘Events after the Reporting Period’ and Ind AS 2 ‘Inventories’.
Para 3 of Ind AS 10 ‘Events after the Reporting Period’ defines “Events after the
reporting period are those events, favourable and unfavourable, that occur between the
end of the reporting period and the date when the financial statements are approved by
the Board of Directors in case of a company, and, by the corresponding approving
authority in case of any other entity for issue. Two types of events can be identified:
(a) those that provide evidence of conditions that existed at the end of the reporting
period (adjusting events after the reporting period); and
(b) those that are indicative of conditions that arose after the reporting period (non-
adjusting events after the reporting period).
Further, paragraph 10 of Ind AS 10 states that:
“An entity shall not adjust the amounts recognised in its financial statements to reflect
non-adjusting events after the reporting period”.
Further, paragraph 6 of Ind AS 2 defines:
“Net realisable value is the estimated selling price in the ordinary course of business
less the estimated costs of completion and the estimated costs necessary to make the
sale”.

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 Further, paragraph 9 of Ind AS 2 states that:
“Inventories shall be measured at the lower of cost and net realisable value”.
Accountant of Jupiter Ltd. has re-measured the inventories after adjusting the event in
its financial statement which is not correct and nor in accordance with provision of
Ind AS 2 and Ind AS 10.
Accordingly, the event causing the damage to the inventory occurred after the reporting
date and as per the principles laid down under Ind AS 10 ‘Events After the Reporting
Date’ is a non-adjusting event as it does not affect conditions at the reporting date.
Non-adjusting events are not recognised in the financial statements, but are disclosed
where their effect is material.
Therefore, as per the provisions of Ind AS 2 and Ind AS 10, the consignment of
inventories shall be recorded in the Balance Sheet at a value of Rs. 8 lakhs calculated
below:
Rs.’ lakhs
Cost 8.00
Net realisable value 9.60
Inventories (lower of cost and net realisable value) 8.00
3. (a) Either
The parent’s separate statement of profit and loss for 20X3-20X4 would show a gain on
the sale of investment of Rs. 40,000 calculated as follow:
Rs. ‘000
Sale proceeds 200
Less: Cost of investment in subsidiary (160)
Gain on sale in parent’s account 40
However, the group’s statement of profit & loss for 20X3-20X4 would show a gain on
the sale of subsidiary of Rs. 8,000 calculated as follows:
Rs.’000
Sale proceeds 200
Less: share of net assets at date of disposal (Rs. 2,25,000 X 80%) (180)
Goodwill on consolidation at date of sale (W.N 1) (12) (192)
Gain on sale in the group’s account 8

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 Working Note
The goodwill on consolidation (assuming partial goodwill method) is calculated as
follows: Rs.’000
Fair value of consideration at the date of acquisition 160
Non- controlling interest measured at proportionate share of the
acquiree’s identifiable net assets (1,75,000 X 20%) 35
Less: fair value of net assets of subsidiary at date of acquisition (175) (140)
Goodwill arising on consolidation 20
Impairment at 31 March 20X3 (8)
Goodwill at 31 March 20X4 12
Or
(i) Carrying amount of investment in Separate Financial Statement of Bright Ltd.
as on 31.03.20X2
Rs.
Amount paid for investment in Associate (on 1.06.20X1) 2,00,000
Less: Pre-acquisition dividend (Rs. 50,000 x 30%) (15,000)
Carrying amount as on 31.3.20X2 as per AS 13 1,85,000
(ii) Carrying amount of investment in Consolidated Financial Statements of Bright
Ltd. as on 31.3.20X2 as per AS 23
Rs.
Carrying amount as per separate financial statements 1,85,000
Add: Proportionate share of profit of investee as per equity
method (30% of Rs. 3,00,000 for 10 months) 75,000
Carrying amount as on 31.3.20X2 2,60,000

(iii) Carrying amount of investment in Consolidated Financial Statement of Bright

Ltd. as on 30.6.20X2 as per AS 23
Rs.
Carrying amount as on 31.3.20X2 2,60,000
Less: Dividend received (Rs. 60,000 x 30% x 10/12) (15,000)
Carrying amount as on 30.6.20X2 2,45,000
(b) In the above situation, the Borrowing cost needs to determine for interest cost on such
foreign currency loan and eligible exchange loss difference if any.

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 (a) Interest on Foreign currency loan for the period :
USD 20,000 x 5% = USD 1,000
Converted in Rs. : USD 1,000 x Rs. 48/USD = Rs. 48,000
Increase in liability due to change in exchange difference :
USD 20,000 x (48 - 45) = Rs. 60,000
(b) Interest that would have resulted if the loan was taken in Indian Currency:
USD 20,000 x Rs. 45/USD x 11% = Rs. 99,000
(c) Difference between Interest on Foreign Currency borrowing and local Currency
borrowing :
Rs. 99,000 - 48,000 = Rs. 51,000
Hence, out of Exchange loss of Rs. 60,000 on principal amount of foreign currency loan,
only exchange loss to the extent of Rs. 51,000 is considered as borrowing costs.
Total borrowing cost to be capitalized is as under :
(a) Interest cost on borrowing Rs. 48,000
(b) Exchange difference to the extent considered to be
an adjustment to Interest cost Rs. 51,000
Rs. 99,000
The exchange difference of Rs. 51,000 has been capitalized as borrowing cost and the
remaining Rs. 9,000 will be expensed off in the Statement of Profit and loss.
(c) The entity also considers the requirements in paragraphs 56–58 of Ind AS 115 on
constraining estimates of variable consideration to determine whether the estimated
amount of variable consideration of Rs. 48,500 (Rs. 50 × 970 products not expected to be
returned) can be included in the transaction price. The entity considers the factors in
paragraph 57 of Ind AS 115 and determines that although the returns are outside the
entity's influence, it has significant experience in estimating returns for this product and
customer class. In addition, the uncertainty will be resolved within a short time frame
(ie the 30-day return period). Thus, the entity concludes that it is highly probable that a
significant reversal in the cumulative amount of revenue recognised (i.e. Rs. 48,500) will
not occur as the uncertainty is resolved (i.e. over the return period).
The entity estimates that the costs of recovering the products will be immaterial and
expects that the returned products can be resold at a profit.
Upon transfer of control of the 1,000 products, the entity does not recognise revenue for
the 30 products that it expects to be returned. Consequently, in accordance with
paragraphs 55 and B21 of Ind AS 115, the entity recognises the following:
(a) revenue of Rs. 48,500 (Rs. 50 × 970 products not expected to be returned);

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 (b) a refund liability of Rs. 1,500 (Rs. 50 refund × 30 products expected to be returned);
and
(c) an asset of Rs. 900 (Rs. 30 × 30 products for its right to recover products from
customers on settling the refund liability).
4. (a) Since the earnings of the entity is non-market related, hence it will not be considered in
fair value calculation of the shares given. However, the same will be considered while
calculating number of shares to be vested.
Workings:
20X1 20X2 20X3
Total employees 500 500 500
Employees left (Actual) (29) (58) (79)
Employees expected to leave in the next (31) (23) -
year
Year end – No of employees 440 419 421
Shares per employee 100 100 100
Fair value of share at grant date 122 122 122
Vesting period 1/2 2/3 3/3
Expenses-20X1 (Note 1) 26,84,000
Expenses-20X2 (Note 2) 7,23,867
Expenses-20X3 (Note 3) 17,28,333
Note 1:
Expense for 20X1 = No. of employees x Shares per employee x Fair value
of share x Proportionate vesting period
= 440 x 100 x 122 X ½
= 26,84,000
Note 2:
Expense for 20X2 = (No of employees x Shares per employee x Fair value of share x
Proportionate vesting period) – Expense recognized in year 20X1
= (419 x 100 x 122 x 2/3) – 26,84,000
= 7,23,867
Note 3:
Expense for 20X3 = (No of employees x Shares per employee x Fair value
of share x Proportionate vesting period) – Expense
recognized in year 20X1 and 20X2
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 = (421 x 100 x 122 x 3/3) – (26,84,000 + 7,23,867)
= 17,28,333.
Journal Entries
31st December, 20X1
Employee benefits expenses Dr. 26,84,000
To Share based payment reserve (equity) 26,84,000
(Equity settled shared based payment expected vesting amount)
31st December, 20X2
Employee benefits expenses Dr. 7,23,867
To Share based payment reserve (equity) 7,23,867
(Equity settled shared based payment expected vesting amount)
31st December, 20X3
Employee benefits expenses Dr. 17,28,333
To Share based payment reserve (equity) 17,28,333
(Equity settled shared based payment expected vesting amount)
Share based payment reserve (equity) Dr. 51,36,200
To Share Capital 51,36,200
(Share capital Issued)

(b) Subsidiary’s earnings per share

Basic EPS Rs. 5.00 calculated: Rs. 5,400 (a) – Rs.400 (b)
1,000 (c)

Diluted EPS Rs. 3.66 calculated: Rs. 5,400 (d)

(1,000 + 75 (e) + 400(f))
Notes:
(a) Subsidiary's profit attributable to ordinary equity holders.
(b) Dividends paid by subsidiary on convertible preference shares.
(c) Subsidiary's ordinary shares outstanding.
(d) Subsidiary's profit attributable to ordinary equity holders (Rs. 5,000) increased by
Rs. 400 preference dividends for the purpose of calculating diluted earnings per
share.
(e) Incremental shares from warrants, calculated: [(Rs. 20 – Rs. 10) ÷ Rs. 20] × 150.
(f) Subsidiary's ordinary shares assumed outstanding from conversion of convertible
preference shares, calculated: 400 convertible preference shares × conversion
factor of 1.
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 Consolidated earnings per share
Basic EPS Rs. 1.63 calculated: Rs. 12,000(a) + Rs. 4,300(b)
10,000(c)

Diluted EPS Rs. 1.61 calculated: Rs. 12,000 + Rs. 2,928(d) + Rs. 55(e) + Rs. 1,098(f)
10,000
(a) Parent's profit attributable to ordinary equity holders of the parent entity.
(b) Portion of subsidiary's profit to be included in consolidated basic earnings per share,
calculated: (800 × Rs. 5.00) + (300 × Re 1.00).
(c) Parent's ordinary shares outstanding.
(d) Parent's proportionate interest in subsidiary's earnings attributable to ordinary
shares, calculated: (800 ÷ 1,000) × (1,000 shares × Rs. 3.66 per share).
(e) Parent's proportionate interest in subsidiary's earnings attributable to warrants,
calculated: (30 ÷ 150) × (75 incremental shares × Rs. 3.66 per share).
(f) Parent's proportionate interest in subsidiary's earnings attributable to convertible
preference shares, calculated: (300 ÷ 400) × (400 shares from conversion × Rs. 3.66
per share).
5. (A) (i) At the time of initial recognition
Rs.
Liability component
Present value of 5 yearly interest payments of Rs. 40,000,
discounted at 12% annuity (40,000 x 3.605) 1,44,200
Present value of Rs. 5,00,000 due at the end of 5 years,
discounted at 12%, compounded yearly (5,00,000 x 0.567) 2,83,500
4,27,700
Equity component
(Rs. 5,00,000 – Rs. 4,27,700) 72,300
Total proceeds 5,00,000

Note: Since Rs. 105 is the conversion price of debentures into equity shares and not
the redemption price, the liability component is calculated @ Rs. 100 each only.

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 Journal Entry
Rs. Rs.
Bank Dr. 5,00,000
To 8% Debentures (Liability component) 4,27,700
To 8% Debentures (Equity component) 72,300
(Being Debentures are initially recorded a fair value)
(ii) At the time of repurchase of convertible debentures
The repurchase price is allocated as follows:
Carrying Fair Value Difference
Value @ @ 9%
12%
Rs. Rs. Rs.
Liability component
Present value of 2 remaining yearly
interest payments of Rs. 40,000,
discounted at 12% and 9%, respectively 67,600 70,360
Present value of Rs. 5,00,000 due in 2
years, discounted at 12% and 9%,
compounded yearly, respectively 3,98,500 4,21,000
Liability component 4,66,100 4,91,360 (25,260)
Equity component (5,25,000 -4,91,360) 72,300 33,640* 38,660
Total 5,38,400 5,25,000 13,400
*(5,25,000 – 4,91,360) = 33,640
Journal Entries

Rs. Rs.
8% Debentures (Liability component) Dr. 4,66,100
Profit and loss A/c (Debt settlement expense) Dr. 25,260
To Bank A/c 4,91,360
(Being the repurchase of the liability component
recognised)
8% Debentures (Equity component) Dr. 72,300
To Bank A/c 33,640
To Reserves and Surplus A/c 38,660
(Being the cash paid for the equity component recognised)

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 (b) The year-wise anticipated reversal of temporary differences is as under:
Particulars Year Year Year Year
ending on ending on ending ending on
March 31, March 31, on March March 31,
20X2 20X3 31, 20X4 20X5
Reversal of taxable temporary
difference relating to
accelerated depreciation over 3,000 3,000 3,000 Nil
next 3 years (Rs. 9,000/3)
Reversal of deductible 1,000 1,000 1,000 1,000
temporary difference relating
to preliminary expenses over
next 4 years (Rs. 4,000/4)
B Limited will recognise a deferred tax liability of Rs. 2,700 on taxable temporary
difference relating to accelerated depreciation of Rs. 9,000 @ 30%.
However, it will limit and recognise a deferred tax asset on reversal of deductible
temporary difference relating to preliminary expenses reversing up to year ending March
31, 20X4 amounting to Rs. 900 (Rs. 3,000 @ 30%). No deferred tax asset shall be
recognized for the reversal of deductible temporary difference for the year ending on
March 31, 20X5 as there are no taxable temporary differences. Further, the outlook is
also a loss. However, if there are tax planning opportunities that could be identifie d for
the year ending on March 31, 20X5 deferred tax asset on the remainder of Rs. 1,000
(Rs. 4,000 – Rs. 3,000) of deductible temporary difference could be recognised at the
30% tax rate.
6. (a) (i) As per section 135 of the Companies Act 2013
Every company having either
➢ net worth of Rs. 500 crore or more, or
➢ turnover of Rs. 1,000 crore or more or
➢ a net profit of Rs. 5 crore or more
during immediate preceding financial year shall constitute a Corporate Social
Responsibility (CSR) Committee of the Board consisting of three or more directors
(including at least one independent director).
(ii) A company which meets the net worth, turnover or net profits criteria in immediate
preceding financial years, will need to constitute a CSR Committee and comply with
provisions of sections 135 (2) to (5) read with the CSR Rules.
As per the criteria to constitute CSR committee -
1) Net worth greater than or equal to INR 500 Crores: This criterion is not satisfied.

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 2) Sales greater than or equal to INR 1000 Crores: This criterion is not satisfied.
3) Net Profit greater than or equal to INR 5 Crores: This criterion is satisfied in
financial year ended March 31, 20X3.
Hence, the Company will be required to form a CSR committee.
(b) (i) Calculation and allocation of impairment loss in 2016 (Amount in Rs. lakhs)
Goodwill Identifiable Total
assets
Historical cost 2,000 4,000 6,000
Accumulated depreciation/amortisation (4 yrs.) (1,600) (1,067) (2,667)
Carrying amount before impairment 400 2,933 3,333
Impairment loss* (400) (213) (613)
Carrying amount after impairment loss 0 2,720 2,720

* Notes:
1. As per para 87 of AS 28, an impairment loss should be allocated to reduce the carrying
amount of the assets of the unit in the following order:
(a) first, to goodwill allocated to the cash-generating unit (if any); and
(b) then, to the other assets of the unit on a pro-rata basis based on the
carrying amount of each asset in the unit.
Hence, first goodwill is impaired at full value and then identifiable assets are
impaired to arrive at recoverable value.
2. Since the goodwill has arisen on acquisition of assets, AS 14 comes into the picture. As
per para 19 of AS 14, goodwill shall amortise over a period not exceeding five years
unless a somewhat longer period can be justified. Therefore, the amortization period of
goodwill is considered as 5 years.
(ii) Carrying amount of the assets at the end of 2018 (Amount in Rs. lakhs)
End of 2018 Goodwill Identifiable assets Total
Carrying amount in 2018 0 2,225 2,225
Add: Reversal of impairment loss (W.N.2) - 175 175
Carrying amount after reversal of impairment loss - 2,400 2,400

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 Working Note:
1. Calculation of depreciation after impairment till 2018 and reversal of impairment loss
in 2018.
(Amount in Rs. lakhs)
Goodwill Identifiable Total
assets
Carrying amount after impairment loss in 2016 0 2,720 2,720
Additional depreciation (i.e. (2,720/11) x 2) – (495) (495)
Carrying amount 0 2,225 2,225
Recoverable amount 3,420
Excess of recoverable amount over carrying 1,195
amount

Note: It is assumed that the restriction by the Government has been lifted at the end
of the year 2018.
2. Determination of the amount to be impaired by calculating depreciated historical cost
of the identifiable assets without impairment at the end of 2018
(Amount in Rs. lakhs)
End of 2018 Identifiable assets
Historical cost 4,000
Accumulated depreciation (266.67 x 6 years) = (1,600)
Depreciated historical cost 2,400
Carrying amount (in W.N. 1) 2,225
Amount of reversal of impairment loss 175
Notes:
1. As per para 107 of AS 28, in allocating a reversal of an impairment loss for a
cash-generating unit, the carrying amount of an asset should not be increased
above the lower of:
(a) its recoverable amount (if determinable); and
(b) the carrying amount that would have been determined (net of
amortisation or depreciation) had no impairment loss been recognised for
the asset in prior accounting periods.
Hence impairment loss reversal is restricted to Rs. 175 lakhs only.
2. The reversal of impairment loss took place in the 6 th year. However, goodwill
is amortised in 5 years. Therefore, there would be no balance in the goodwill
account in the 6th year even without impairment loss. Hence in W.N. 2 above
there is no column for recalculation of goodwill.

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