Answer 1

The amount of Rs. 72 million (360 × 20%) would be initially recorded as contract liability (1 mark). TL should include
Rs. 54 million additional consideration in the transaction price of the contract as it is highly probable that TL will
achieve the delivery dates (1 mark). So revenue of Rs. 2.3 million [(360 + 54)/180] should be recognised upon delivery
of each vehicle. Revenue of Rs. 115 million (50 × Rs. 2.3m) would be recognised upon delivery of first lot of 50 vehicles
on 31 December 2024 (2 marks) by debiting receivable with Rs. 80 million (50 × Rs. 2m ×80%) (0.5 mark), contract
liability with Rs. 20 million (50 × Rs. 2m × 20%) (0.5 mark) and contract asset with Rs. 15 million (50 × Rs. 0.3m) (0.5
mark).

TL should recognise an asset for the commissions to sales employees of Rs. 21 million because it is incremental costs
of obtaining the contract and is expected to be recovered through future deliveries (1 mark). This cost should be
amortised on a systematic basis over the contract period. An amount of Rs. 5.83 million (Rs. 21m × 50/180) should be
expensed out in 2024 (1.5 marks).
Answer 2
Provision for fine:
According to IAS 37, a provision shall be recognized when all of the following conditions are met:
• There is a present obligation (legal or constructive) as a result of a past event.
• It is probable that outflow of resources will be required to settle the obligation.
• A reliable estimate can be made of the amount of the obligation.

Since all the above conditions are met (2 marks), a provision shall be made for the penalty for the best estimate of
Rs. 9 million (1 mark).

Inventory of contaminated product:

Contaminated inventory costing Rs. 70 million shall be written off. (1 Mark)

Compensation for non-supply of food supplement to CCC:

According to IAS 37, if an entity has a contract that is onerous, the present obligation under the contract shall be
recognized and measured as a provision.
Since factory has been sealed for 3 months, therefore paying compensation of Rs. 6m per month is an onerous
contract (1 mark). Hence HCL should make a provision for the compensation payable under the contract i.e. Rs. 18
million. (Rs. 6m x 3) (2 marks)

Damages from FCE:

In view of the non-availability of any response from FCE, recovery of contamination claim of Rs. 79 million is
neither certain nor probable. Therefore, the claim shall not be recognized nor a contingent asset be disclosed (2
mark).
Answer 3
1 FALSE
2 FALSE
3 TRUE
4 FALSE
5 FALSE
6 TRUE
7 FALSE
8 FALSE
9 FALSE
10 FALSE

Page 1 of 5
Answer 4 Dr. Cr.
Marks -------- Rs. -------
01-01-23 Investment [(50 + 0.5) x 100 x Rs. 150] 757,500
Cash 2 757,500
[Initial recognition]

31-12-23 Investment [$343(W-1) x Rs. 152] 52,136

Investment income (W-1) 1 52,136
[Investment income for 2023]

31-12-23 Cash [$400 x Rs. 152] 60,800

Investment 1 60,800
[Interest received for 2023]

31-12-23 Investment 10,100

Exchange gain (W-2) 1 10,100
[Exchange gain for 2023]

31-12-24 Investment [$340(W-1) x Rs. 153] 52,020

Investment income (W-1) 1 52,020
[Investment income for 2024]

31-12-24 Cash [$400 x Rs. 153] 61,200

Investment 1 61,200
[Interest received for 2024]

31-12-24 Investment 4,993

Exchange gain (W-2) 1 4,993
[Exchange gain for 2024]

W-1
------------------------ $ Amortized cost ------------------------- Rupees
Date Opening Closing amortized cost
Interest Cashflow
balance balance (translated)
[A] [B = A x 6.8%] [C] [D = A + B - C] [E]
31-12-23 5,050 343 400 4,993 758,936 [4,993 x 152]
31-12-24 4,993 340 400 4,933 754,749 [4,933 x 153]

W-2
------------------------ Book value (ignoring FV change) -------------------------
Date Opening Exchange
Interest Cashflow Closing balance
balance gain/(loss)
[F] [G] [H] [I = E - F - G + H] [J = F + G - H + I]
--------------------------------------------- Rs. ------------------------------------------------
31-12-23 757,500 52,136 60,800 10,100 758,936
31-12-24 758,936 52,020 61,200 4,993 754,749
Answer 5 Dr. Cr.
(1) Marks -------- Rs. -------
Investment in debentures 3,500
Gain on initial recognition 1,000
Finance cost 3 2,500
[Correction of purchase of debentures]

Investment in debentures [153,500 x 12.75% x 9/12] 14,678

Interest receivable [100,000 x 10% x 9/12] 7,500
Investment income (balancing) 3 7,178
[Correction of interest income]

(2)
Investment in shares [8,000 x 40] 320,000
Suspense 1 320,000
[Correction of purchase of shares]

Investment in shares [8,000 x 8] 64,000

Fair value reserve [OCI] 1 64,000
[FV gain recognized at year end]
Answer 6
(i) A
(ii) B [Decrease in current ratio because of "current portion of lease liability"
and Increase in gearing ratio because of "Non current portion of liability"]
(iii) B
(iv) A [5 x 30% x 140 + 5 x 70% x 150]
(v) A
Answer 7
(i) Dr. Cr.
--------- Rs. million --------
01-05-24 Advance to supplier [$2.6 x 10% x 200] 52.00
Bank 1 mark 52.00
[Advance paid for property]

01-07-24 Investment property 543.40

Advance to supplier 2 marks 52.00
Bank [$2.6 x 70% x 210] 382.20
Payable [$2.6 x 20% x 210] 109.20
[Purchase of property]

01-08-24 Payable 109.20

Exchange loss (P&L) 2 marks 3.12
Bank [$2.6 x 20% x 216] 112.32
[Payable settled]

01-09-24 Bank [$0.24 x 220] 52.80

Unearned rent 1 mark 52.80
[Advance rent received]

31-12-24 Unearned rent [52.8 x 4/12] 17.60

Rent income 1 mark 17.60
[Rent income recognized]

31-12-24 Investment property [$2.5 x 232 - Rs. 543.40] 36.60

P&L (FV gain) 1 mark 36.60
[Fair value gain at year end]

(ii)
Extracts - SOFP Rs. million
Non current assets
Investment property [543.40 + 36.60] 1 mark 580.00

Current liabilities
Unearned rent [52.8 - 17.60] 1.5 mark 35.20

Extracts - SOCI
Rent income 0.5 mark 17.60
Fair value gain 0.5 mark 36.60
Exchange loss 0.5 mark (3.12)
Answer 8
(a)
HPL
Extracts of SOFP
as at December 31, 2024
Marks Rs. million
Non-current assets
Right-of-use asset [201.87(W-1) - 40.37] 1.5 161.50

Non-current liabilities
Lease liabilities (W-2) 1 120.09

Current liabilities
Lease liabilities (W-2) 1 50.00
Usage fee payable - machine [(40 - 30) x 0.3] 1.5 3.00

HPL
Extracts of SOCI
for the year ending December 31, 2024
Rs. million
Depreciation [201.87(W-1) ÷ 5] 0.5 40.37
Interest expense (W-2) 1 18.22
Usage fees 0.5 3.00

W-1 Initial recognition

Rs. million
PV of lease payments [50 + 50 x 4-year AF at 12%] 201.87

W-2 Lease schedule

Date Open. Bal Interest Lease payment Clos. Bal

01-01-24 201.87 - 50.00 151.87

01-01-25 151.87 18.22 50.00 120.09

(b)

(i) Applying the requirements of IFRS 15 to TrillCo’s purchasing pattern at 30 September 2024, Taplop should
conclude that it was highly probable that sales would be less than 500 units therefore discount would not be
applied. (1 mark) Consequently, Taplop should recognize revenue of 70 x Rs. 50,000 = Rs. 3,500,000 (1 mark) for
the first quarter ended 30 September 2024.

(ii) In the quarter ended 31 December 2024, TrillCo’s purchasing pattern changed such that it would be legitimate
for Taplop to conclude that TrillCo’s purchases would exceed the threshold for the volume discount in the year to
30 June 2025, and therefore that it was appropriate to reduce the price to Rs. 45,000 per laptop. (1 mark) Taplop
should therefore recognize revenue of Rs. 10,900,000 for the quarter ended 31 December 2024. The amount is
calculated as from Rs. 11,250,000 (250 laptops x Rs. 45,000) (1 mark) less the change in transaction price of Rs.
350,000 (70 laptops x Rs. 5,000 price reduction) (1 mark) for the reduction of the price of the laptops sold in the
quarter ended 30 September 2024.
Answer 9
(a)
Date Particulars Dr. Cr.
----- Rs.'000 ----
01-Apr-24 Lease receivable (1,500 / 0.6) 1 mark 2,500.00
Cost of sales [1,500 - 133.66 (W-1)] 1 mark 1,366.34
Sales [2,500 - 133.66 (W-1)] 1 mark 2,366.34
Inventory 1 mark 1,500.00
[Initial recognition of lease]
01-Apr-24 Bank 200.00
Lease receivable 1 mark 200.00
(Down payment received)
01-Apr-24 Selling commission 50.00
Bank 1 mark 50.00
[Selling commission paid to sale staff]
31-Dec-24 Lease receivable [(2,500 - 200) x 11% x 9/12] 189.75
Finance income 2 marks 189.75
[Finance income for the year]

W-1 Rs.'000
PV of UGRV [250 x discount factor] 133.66

(b)
Notes to financial statements

4 - Net investment in lease

4.1 - Lease term is 4 years which extendable for further 2 years. Lease rental is payable annually in arrears.

4.2 - Lease payments are receivable as follows: Rs.'000

Year 1 512.07
Year 2 512.07
Year 3 512.07
Year 4 512.07
Year 5 512.07
More than 5 years 512.07
3,072.43 3 marks

4.3 - Reconciliation:
Total lease payments receivable 3,072.43
Add: Unguaranteed residual value 250.00 1 mark
Gross investment in lease 3,322.43
Less: Unearned finance income (bal.) (832.68) 1 mark
Net investment in lease 2,489.75 1 mark

Page 1 of 1
Answer 10
(a) ------ Rs. million ------
01-07-23 ROU asset 1 mark 16.99
Lease liability (W-1) 1 mark 15.94
Cash [0.25 + 0.80] 1 mark 1.05
[Initial recognition of lease]

01-07-23 Lease liability 4.80

0.5 mark
Cash 4.80
[Lease rental paid]

31-12-23 Depreciation [16.99/4 x 6/12] 2.12

1 mark
Accumulated depreciation 2.12
[Dep for 6-months in 2023]

31-12-23 Finance cost [1.89(W-2) x 6/12] 0.95

1 mark
Lease liability 0.95
[Finance cost for 6-months in 2023]

30-06-24 Finance cost 0.95

1 mark
Lease liability 0.95
[Finance cost for 6-months in 2024]

01-07-24 Lease liability 4.80

0.5 mark
Cash 4.80
[Lease rental paid]

31-12-24 Depreciation [16.99/4] 4.25

1 mark
Accumulated depreciation 4.25
[Dep for 2024]

31-12-24 Finance cost [1.40 x 6/12] 0.70

1 mark
Lease liability 0.70
[Finance cost for 6-months in 2024]

(b)
30-06-27 Lease liability 1.00
P&L 2 marks 0.20
Cash [4 - 3.2] 0.80
[Payment to settle RV guarantee]

30-06-27 Accumulated depreciation 16.99

1 mark
ROU asset 16.99
[ROU derecognized]
W-1 Rs. million
PV of lease payments:
- Rentals [4.80 + 4.80 x 3-year annuity factor at 17%] 15.41
- Expected payment against GRV [(4 - 3) x 1.17-4] 0.53
15.94

W-2
Date Open. Bal Interest Payment Clos. Bal
01-07-23 15.94 - (4.80) 11.14
01-07-24 11.14 1.89 (4.80) 8.23
01-07-25 8.23 1.40 (4.80) 4.83