INTERNATIONAL FINANCIAL REPORTING STANDARDS

(IFRS)
SOLVED QUESTION PAPER – NOV / DEC 2019

SECTION – A (2 MARKS)

a. Mention any two objectives of IFRS.

Reliability: financial statements are provided complete and unbiased.
Relevance: Information derived using this is relevant. It works better for taking future
decisions and comparability across international boundaries.
Conceptual framework: this is a complete conceptual framework which serves as a tool to
develop standards.
Compatibility: IFRS adoption enables the comparison which is very important to do in today
competitive era for the efficient functioning of the capital market.

b. What are Inventories as per Ind AS-2?

Inventories include assets held for sale in the ordinary course of business (finished goods),
assets in the production process for sale in the ordinary course of business (work in process), and
materials and supplies that are consumed in production (raw materials).

c. What is EPS?
Earnings per share (EPS) is a company's net profit divided by the number of common shares
it has outstanding. EPS indicates how much money a company makes for each share of its stock,
and is a widely used metric to estimate corporate value.

d. What is meant by Government Grants?

Government grants are assistance by government in the form of transfers of resources to an
entity in return for past or future compliance with certain conditions relating to the operating
activities of the entity.

e. Mention any four examples of Intangible Assets?

An intangible asset is an asset that is not physical in nature. Goodwill, brand recognition and
intellectual property, such as patents, trademarks, and copyrights, are all intangible
assets. Intangible assets exist in opposition to tangible assets, which include land, vehicles,
equipment, and inventory.

f. Expand IASB and GAAP.

IASB - International Accounting Standards Board (IASB).
GAAP - Generally Accepted Accounting Principles (GAAP)
g. Mention any two items of other Income.
Examples of other income include income from interest, rent, and gains resulting from the
sale of fixed assets.

SECTION – B (6 MARKS)

2. Briefly explain six limitations of IFRS.

1. It would increase the cost of implementation for small businesses.
Large businesses would absorb the cost of adopting the International Financial Reporting
Standards thanks to their need to produce these reports outside of the U.S. already.
2. It would lead to concerns with standards manipulation.
The flexibility of IFRS can create numerous benefits, but it also creates a disadvantage with
this feature.
3. It would require global consistency in auditing and enforcement.
The enforcement of the International Financial Reporting Standards can create some
disadvantages as well.
4. It would increase the amount of work placed on accountants.
The implementation of a new system of global accounting standards would require a
complete revision of the domestic accounting processes and strategies.
5. It would create an adjustment period filled with tumult.
When organizations begin to move from their current accounting standards mandated by the
country of origin to the global accounting rules set by the International Financial Reporting
Standards
6. It would require changes at the educational level as well.
There are numerous business that would feel the financial impacts of adopting IFRS
immediately, even though the SEC estimates that about 100 firms are already using this as their
primary standard since a majority of their revenue comes from overseas.
7. It would not reduce the home-court advantage for the modern firm.
Although there are some shareholders who would be more inclined to support foreign
businesses if we adopt IFRS, there is no guarantee that this would happen throughout every
demographic.
8. It would still require global acceptance to be useful.
If the United States decides to adopt IFRS, then there would still be other holdouts around
the world that would choose to use their preferred domestic standard.
3. What is Interim Financial Report? Mention the minimum components of Interim
financial report.
An interim statement is a financial report covering a period of less than one year. Interim
statements are used to convey the performance of a company before the end of normal full-
year financial reporting cycles. Unlike annual statements, interim statements do not have to be
audited.
Interim statements increase communication between companies and the public and provide
investors with up-to-date information between annual reporting periods.
Interim statements are financial reports produced by firms covering a period of less than one
year.
The goal is to keep shareholders and analysts more up-to-date and in regular communication
with corporate management, and to alert the public to material changes to the company in a timely
fashion.
An interim financial report should include, at a minimum, the following components:
(a) condensed balance sheet;
(b) condensed statement of profit and loss;
(c) condensed cash flow statement; and
(d) selected explanatory notes.

4. From the following prepare a statement of profit and loss for the year ended 31.03.2019 as
per companies’ act, 2013.
PARTICULARS AMOUNT
Revenue from operation 12,00,000
Salaries and Allowances 1,40,000
Stationery 30,000
Interest on long term loans 50,000
Publicity 80,000
Raw material consumed 2,20,000
Discount allowed 20,000
Depreciation 20,000
Rent Received 80,000

STATEMENT OF PROFIT AND LOSS ACCOUNT OF MR. XYZ COMPANY AS ON 31 ST

MARCH 2019

PARTCULARS AMOUNT AMOUNT

1. Revenue from operations 12,00,000
2. ADD: Other incomes (Rent received) 80,000
3. TOTAL REVENUE (A) 12,80,000
4. EXPENSES
a. Cost of Materials consumed 2,20,000
b. Purchase of stock in trade NIL
 c. Changes in inventory NIL
d. Employees benefits - Salaries and allowances 1,40,000
e. Finance cost - Interest on long term loans 50,000
g. Other Expenses 1,50,000
TOTAL EXPENSES (B) 5,60,000
5. Profit before tax (3 - 4 ) / (A – B) (12,80,000 – 5,60,000) 7,20,000
6. Tax during the year NIL
7. Profit after tax (5 – 6) (7,20,000 – 0) 7,20,000
Profit attributable to:
1. Owners of the parent (B/F) NIL
2. Non – Controlling interest NIL
TOTAL 7,20,000

OTHER EXPENSES
Stationary 30,000
Publicity 80,000
Discount allowed 20,000
Depreciation 20,000
TOTAL 1,50,000

5. H ltd, acquired 60% shares of S ltd. On 01.07.2018. The following information is available
as on 31.03.2019 in respect of S Ltd.
a. Share capital: 1,00,000 equity shares of Rs.10 each.
b. General Reserve as on 01.04.2018 – Rs.80,000
c. Profit and Loss balance (Cr.) on 01.04.2018 – Rs. 60,000
d. Net profit for the year ended 31.03.2019 – Rs.1,00,000
Calculate non – controlling interest.

CALCULATION OF NON – CONTROLLING INTEREST (NCI)

PARTICULARS AMOUNT AMOUNT
Share Capital (1,00,000 x 40%) 40,000
ADD: SHARES OF CAPITAL PROFITS (01 – 04 – 2018)
a. Share of General reserve (80,000 x 40%) 32,000
b. Share of P & L a/c (60,000 x 40%) 24,000
c. Share of Profit and loss account (1,00,000 x 40% x 3/12) 10,000
(01/04/2018 to 01/07/2018)
TOTAL SHARES OF CAPITAL PROFITS 66,000
ADD: SHARES OF REVENUE PROFITS
Net Profit (1,00,000 x 40% x 9/12) (01/07/2018 to 31/03/2019) 30,000
NON – CONTROLLING INTERST 1,36,000
6. T ltd, has a plant whose original cost is Rs. 9,60,000 and accumulated depreciation
amounted Rs. 96,000. Another company sold a similar plant for Rs. 3,80,000 and the selling
expenditure amounted to Rs.35,000. The Management has determined the value in used of
the plant of Rs. 4,10,000. Compute the Impairment Loss.

CALCULATION OF IMPAIRMENT LOSS

Impairment Loss = Carrying Value – Recoverable Amount

Carrying cost of the plant = Original cost – Accumulated Depreciation

Carrying cost of the plant = 9,60,000 – 96,000
Carrying cost of the plant = 8,64,000

Net Realizable value = Fair value – Selling cost

Net Realizable value = 3,80,000 – 35,000
Net Realizable value = 3,54,000

Value in use = 4,10,000

Recoverable Amount = Which is higher (Fair value or value in use)

Recoverable Amount = 3,80,000 or 4,10,000 (Which is higher)
Recoverable Amount = 4,10,000

Impairment Loss = Carrying Value – Recoverable Amount

Impairment Loss = 8,64,000 – 4,10,000
Impairment Loss =4,54,000

SECTION – C (14 MARKS)

7. a. Briefly explain practical challenges in implanting IFRS.

Difference in GAAP and IFRS. Adoption of IFRS means that the entire set of financial
statements will be required to undergo a drastic change. ...
Interaction between Legislation and Accounting. ...
Training and Education. ...
Fair Value Measurement.

 Interaction between Legislation and Accounting

There are concerns about the compatibility of local laws with IFRS in certain matters
pertaining to accounting, such as formats and presentation requirements. Similarly, there is
 uncertainty over tax treatments of items arising from convergence such as unrealized gains
and losses and the move from a tax basis for depreciation to one of useful economic life
(IFRS).

 Training and Education

Lack of training facilities and academic courses on IFRS is also a challenge. A key
challenge is to ensure companies, auditors, regulators and the investment community is
appropriately skilled to apply and interpret IFRS.

 Fair Value Measurement

IFRS uses fair value as a measurement base for valuing most of the items of financial
statements. The use of fair value accounting can bring a lot of volatility and subjectivity to
the financial statements. It also involves a lot of hard work in arriving at the fair value and
valuation experts have to be used.
 Variations in GAAP and IFRS
 Legal and regulatory considerations
 Taxation
 Re-negotiation of contract
 Reporting system

7. b. Briefly explain the benefits of achieving convergence with IFRS.

 To develop a unified set of accounting and reporting standards

 To build a single global financial reporting language
 An accounting framework with global acceptance
 High quality, transparent, understandable, globally enforceable
 More cross border transactions
 Access to international capital and investments
 Enhance confidence of global stakeholders
 Facilitate international acquisitions and mergers
 Peer to Peer Comparison
 It allows for greater comparability
 It is beneficial to new and small investors
 It creates more flexibility
 IFRS save cost
 Unifies business transaction
 Provides consistency
 Better capital market
 Improves internal communication
 Merger and takeover activity
 Investments
 Increasing the level of confidence
  Risk evaluation

Improved financial reporting and tax planning:

Under IFRS, companies will produce a standardized and consistent set of accounting and
financial reports for complying with local statutory and consolidated requirements. This will help
improve the analysis of financial reporting and tax planning processes.

Improved day-to-day operations:

Businesses will get faster access to more in-depth financial performance information to use
in analyzing and making better decisions about day-to-day operations.

Better managed resources:

By standardizing processes and accounting, companies will be able to standardize and
streamline accounting systems across the enterprise and reduce the cost of auditing and statutory
reporting.

Improved financial controls:

By standardizing the approach and control over statutory reporting, businesses will reduce
the risk of penalties and compliance problems enterprise-wide and in individual countries.

Lowered cost of capital:

Increased insight into financial results and adherence to high-quality financial standards, as
specified by IFRS, can benefit both companies and their investors with reduced cost of capital.
8. a. List any fourteen IND AS.
IFRS 1 First-time Adoption of International Financial Reporting Standards
IFRS 2 Share-based Payment
IFRS 3 Business Combinations
IFRS 4 Insurance Contracts
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
IFRS 6 Exploration for and Evaluation of Mineral Resources
IFRS 7 Financial Instruments: Disclosures
IFRS 8 Operating Segments
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IFRS 14 Regulatory Deferral Accounts
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
IFRS 17 Insurance Contracts

8. b. Briefly explain the disclosure of provisions under Ind AS – 37, provisions, contingent
assets and contingent liabilities.
Provisions are liabilities of uncertain timing or amount. A liability represents a present
obligation of the entity that arises from past events, the settlement of which is expected to result in
an outflow from the entity of resources embodying economic benefits. A liability is created by
a legal or constructive obligation2 that results in the entity having .
Provisions are liabilities of uncertain timing or amount. This uncertainty makes them
different from accruals or payables, where the timing and amount are often contractual and the
uncertainty is insignificant.

Recognition criteria

o A provision is recognised when all the following conditions are met (IAS 37.14):

 An entity has a present obligation (legal or constructive) as a result of a past event,

 It is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation; and
 A reliable estimate can be made of the amount of the obligation.
 If these conditions are not met, no provision shall be recognised.

This Standard distinguishes between:

a. Provisions – which are recognised as liabilities (assuming that a reliable estimate can be
made) because they are present obligations and it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligations; and
b. Contingent liabilities – which are not recognised as liabilities because they are either:
c. Possible obligations, as it has yet to be confirmed whether the entity has a present obligation
that could lead to an outflow of resources embodying economic benefits; or
d. Present obligations that do not meet the recognition criteria in this Standard (because either
it is not probable that an outflow of resources embodying economic benefits will be required
to settle the obligation, or a sufficiently reliable estimate of the amount of the obligation
cannot be made).

A contingent liability is:

(a)a possible obligation that arises from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the entity; or
(b)a present obligation that arises from past events but is not recognised because:
(i)it is not probable that an outflow of resources embodying economic benefits will be
required to settle the obligation; or
(ii)the amount of the obligation cannot be measured with sufficient reliability.

Contingent liabilities – which are not recognised as liabilities because they are either:
(i)possible obligations, as it has yet to be confirmed whether the entity has a present
obligation that could lead to an outflow of resources embodying economic
benefits; or
 (ii)present obligations that do not meet the recognition criteria in this Standard (because
either it is not probable that an outflow of resources embodying economic
benefits will be required to settle the obligation, or a sufficiently reliable estimate
of the amount of the obligation cannot be made).

An entity shall not recognise a contingent liability.

 A contingent liability is disclosed, as required by paragraph 86, unless the possibility of an
outflow of resources embodying economic benefits is remote.
 Where an entity is jointly and severally liable for an obligation, the part of the obligation that
is expected to be met by other parties is treated as a contingent liability.
 The entity recognises a provision for the part of the obligation for which an outflow of
resources embodying economic benefits is probable, except in the extremely rare
circumstances where no reliable estimate can be made.
 Contingent liabilities may develop in a way not initially expected.
 Therefore, they are assessed continually to determine whether an outflow of resources
embodying economic benefits has become probable.
 If it becomes probable that an outflow of future economic benefits will be required for an
item previously dealt with as a contingent liability, a provision is recognised in the financial
statements of the period in which the change in probability occurs (except in the extremely
rare circumstances where no reliable estimate can be made).

9. a. T ltd has purchased an equipment for its manufacturing unit. The price paid for the
equipment is Rs.2,20,000 inclusive of GST of Rs. 39,600. The company gets a credit of GST
while calculating tax payable on finished goods sold.
The additional cost incurred are:
Freight – Rs.4,500
Customs duty – Rs. 4,000
Installation expenses – Rs. 3,000
Estimated cost of dismantling and removing the item would be Rs. 1,500 after the
equipment was put in use Rs.11,000 was spent for cleaning the spare parts.
Calculate the cost of PPE as per Ind As- 16
CALCULATION OF COSTS OF ASSETS AS PER IND AS-16

SL.NO PARTICULARS AMOUNT

1 Purchase price – GST (2,20,000 – 39,600) 1,80,400
2 Cost of Freight 4,500
3 Custom duty 4,000
4 Installation charges 3,000
5 Estimate of dismantling and removing items 1,500
6 Equipment was spent on cleaning the spare parts NIL
COSTS OF ASSETS 1,93,400
9. b. CALCULATE THE BORROWING COST OF EXCEL LIMITED.
i. Rs. 8 crores arranged by issuing 8% debentures repayable after 10 years.
ii. Rs. 3 crores by a loan from IDBI with 10 years term at interest of 10% P.A.
iii. Rs. 3 crores overdraft from canara bank at interest of 10% p.a
iv. Cost of issue of debentures is Rs.15,00,000
v. Processing and consultancy charges for IDBI loan – 5% of loan.
vi. Debentures are repayable at 5% premium.

CALCULATION OF BORROWING COST

SL.NO PARTICULARS AMOUNT

1 Interest on Debentures (8,00,00,000 x 8%) 64,00,000
2 Interest o DCC Bank (3,00,00,000 x 10%) 30,00,000
3 Interest on Overdraft (3,00,00,000 x 10%) 30,00,000
4 Cost of issue of Debentures (15,00,000 / 10 years) 1,50,000
5 Service Charges (3,00,00,000 x 5% / 10 years) 1,50,000
6 Premium on Debentures (8,00,00,000 x 5% / 10 years) 4,00,000
TOTAL BORROWING COST 1,31,00,000

10. a. Prepare a statement of profit and loss under companies act, 2013 from the following
details kavya ltd. For the year ended 31.03.2019.
PARTICULARS AMOUNT
Sales 16,00,000
Purchases of raw materials 7,00,000
Commission received 3,00,000
Carriage inwards 1,00,000
Returns outwards 40,000
Opening stock of raw materials 1,80,000
Closing stock of raw materials 1,00,000
Rent received 40,000
Salaries to employees 2,00,000
P.F. Contribution to Employees 50,000
Interest on bank loan 30,000
Interest on debentures 30,000
Sundry expenses 10,000
Depreciation 40,000
Income tax paid 75,000
Excise duty 50,000
Consumables 80,000
Factory expanse 60,000

STATEMENT OF PROFIT AND LOSS ACCOUNT OF MR. KAVYA COMPANY AS ON 31 ST

MARCH 2019
 PARTCULARS AMOUNT AMOUNT
1. Revenue from operations (Sales + Excise Duty) 15,50,000
2. ADD: Other incomes (Commission received + Rent 3,40,000
received) (3,00,000 + 40,000)
3. TOTAL REVENUE (A) 18,90,000
4. EXPENSES
a. Cost of Materials Consumable 80,000
b. Purchase of raw materials – Returns outwards + Carriages 7,60,000
inwards (7,00,000 – 40,000 + 1,00,000)
c. Changes in inventories (Opening stock of raw materials - 80,000
Closing stock of raw materials) (1,80,000 – 1,00,000)
d. Employees benefits 2,50,000
e. Finance cost 60,000
f. Depreciation 40,000
g. Other expenses 70,000
TOTAL EXPENSES (B) 13,40,000
5. Profit before tax (3 - 4 ) / (A – B) (18,90,000 - 13,40,000) 5,50,000
6. Tax during the year 75,000
7. Profit after tax (5 – 6) (5,10,000 – 75,000) 4,75,000
Profit attributable to:
1. Owners of the parent (B/F) NIL
2. Non – Controlling interest NIL
TOTAL 4,75,000

FINANCE COST
Interest on bank loan 30,000
Interest on debentures 30,000
TOTAL 60,000

EMPLOYEE BENEFITS
Salaries to employees 2,00,000
P.F Contribution to employees 50,000
TOTAL 2,50,000

OTHER EXPENSES
Factory expenses 60,000
Sundry expenses 10,000
TOTAL 70,000

10. b. From the following prepare a statement of financial position on 31.03.2019 under
company’s act, 2013.
DEBIT AMOUNT AMOUNT

Tangible assets 12,00,000 10,00,000

 Intangible assets 4,00,000 6,00,000
Current Investments 4,00,000 6,00,000
Other Non – current Investments 4,00,000 10,00,000
Trade Receivables 5,00,000 7,00,000
Stock 8,00,000
Cash 2,00,000
TOTAL 39,00,000 39,00,000

STATEMENT OF FINANCIAL ANALYSIS OF Mr. MNC LIMITED AS ON 31 st MARCH 2019

PARTICULARS AMOUNT AMOUNT

EQUITY AND LIABILITIES
1. Shareholders’ Funds
Equity share capital 10,00,000
General reserve 6,00,000
Profit and loss account 6,00,000
Non-current liabilities 10,00,000
Current liabilities 7,00,000
TOTAL LIABILITIES 39,00,000
ASSETS
Tangible assets 12,00,000
Intangible assets 4,00,000
Current investments 4,00,000
Other non – current investment 4,00,000
Trade receivables 5,00,000
Stock 8,00,000
cash 2,00,000
TOTAL ASSETS 39,00,000

11. a. The statement of financial position of X Ltd and Y Ltd as on 31.03.2019.

LIABILITIES X Ltd Y Ltd
Shares of Rs.10 each 10,00,000 4,00,000
General Reserve on 01.04.2018 3,00,000 1,00,000
P & L on 01.04.2018 1,00,000 40,000
Profit for the year 2018-19 4,00,000 3,00,000
Current Liabilities 1,00,000 1,60,000
Total Liabilities 19,00,000 10,00,000
ASSETS
Fixed Assets 8,00,000 4,00,000
Investments in 30,000 shares in Y ltd 6,00,000 -
Stock 3,00,000 2,00,000
Bank Balance 2,00,000 4,00,000
Total Assets 19,00,000 10,00,000
X Ltd Purchased the shares of Y ltd on 01.07.2018. Calculate non –
controlling interest
 STEP 1 : CALCULATION OF RATIO
PARTICULARS AMOUNT
Number of Shares in Selling Company (‘Y’ Limited) (4,00,000 / 10) (Table value) 40,000
Number of Shares in Purchasing / Acquiring Company ‘X’ Limited (Adjustment 30,000
value)
Minority Shareholders (Selling company – Acquiring company) (40,000 – 30,000) 10,000
Ratio = (Acquiring company ratio: Minority shares)
(30,000 : 10,000) (3 : 1)

STEP 2 : CACLUATION OF CAPITAL PROFITS

PARTICULARS AMOUNT AMOUNT
1. Profit and Loss account as on 01 - 04 – 2018 (Selling company, Table value) 40,000
2. Reserves as on 01 -04 – 2018 (Selling company, Table value) 1,00,000
3. Profits during the year (Adjustment value) NIL
TOTAL SHARES OF CAPITAL PROFITS 1,40,000
Capital Profit = Capital Profit Amount X Minority shares ratio) 35,000
(1,40,000 x 1/4)

STEP 3 : CACLUATION OF REVENUE PROFITS

PARTICULARS AMOUNT AMOUNT
1. Profits during the year 2018 -2019 (Selling company, Table value) 3,00,000
TOTAL SHARES OF REVENUE PROFIT 3,00,000
Revenue Profit = Revenue Profit Amount X Minority shares ratio) 75,000
(3,00,000 x ¼)

STEP 4 : CACLUATION OF NON CONTROLLING INTEREST

PARTICULARS AMOUNT AMOUNT
Share capital / Minority Shareholders (10,000 x 10) 1,00,000
Capital Profit = Minority shares ratio 35,000
Revenue Profit = Minority shares ratio 75,000 1,10,000
NON CONTROLLING INTEREST (NCI) 2,10,000

GOOD WILL CALCULATION / CAPITAL RESERVE

PARTICULARS AMOUNT AMOUNT
Share Capital of (Selling company, Table value) 4,00,000
LESS: 1. Face value of share (30,000 x 10) 3,00,000
2. Capital Profits (1,40,000 x 3/4) (Ratio of purchasing company) 1,0,5000 4,0,5,000
GOODWILL / CAPITAL RESERVE 5,000

11. b. The following are the Balance sheets of P Ltd & Q Ltd as on 31.03.2019
LIABILITIES P Ltd Q Ltd
Share capital of Rs.10 shares 16,00,000 8,00,000
Reserves on 01.04.2018 80,000 1,20,000
P & L a/c 4,00,000 3,20,000
Current Liabilities 2,80,000 3,20,000
Total Liabilities 23,60,000 15,60,000
ASSETS
Plant and Equipment 8,00,000 11,20,000
Investment in shares of Q Ltd (60,000 shares) 8,00,000 -
 Current Assets 7,60,000 4,40,000
Total Assets 23,60,000 15,60,000
P & L A/c of Q Ltd, stood at Rs. 1,20,000 on 01.04.2018 P Ltd acquired shares of
Q Ltd on 01.01.2019.
Compute the non - controlling interest

STEP 1 : CALCULATION OF RATIO

PARTICULARS AMOUNT
Number of Shares in Selling Company (‘Q’ Limited) (8,00,000 /10) 80,000
Number of Shares in Purchasing / Acquiring Company ‘P’ Limited 60,000
Minority Shareholders (Selling company – Acquiring company) 40,000
(80,000 – 60,000)

Ratio = (Acquiring company ratio: Minority Shares)

(60,000 : 40,000) (6 : 4) (3: 2) (2 X 3 = 6) (2 X 2 = 4)

STEP 2 : CACLUATION OF CAPITAL PROFITS

PARTICULARS AMOUNT AMOUNT
ADD: SHARES OF CAPITAL PROFITS
1. Profit and Loss account (Selling company) 3,20,000
2. Reserves (Selling company) 1,20,000
3. Profits during the year (1,20,000 x 9 months / 12) (1.4.2018 – 1.01.2019) 90,000
TOTAL SHARES OF CAPITAL PROFITS 5,30,000
Capital Profit = Capital Profit Amount X Minority shares ratio) 2,12,000
(5,30,000 x 2/5)

STEP 3 : CACLUATION OF OF REVENUE PROFITS

PARTICULARS AMOUNT AMOUNT
1. Profits during the year (1,20,000 x 3 months / 12) (1.01.2019 - 31.03.2019) 30,000
TOTAL SHARES OF REVENUE PROFIT 30,000
Revenue Profit = Revenue Profit Amount X Minority shares ratio) 7,500
(30,000 x 1/4)

STEP 4 : CACLUATION OF NON CONTROLLING INTEREST

PARTICULARS AMOUNT AMOUNT
Share capital / Minority Shareholders (40,000 x 10) 4,00,000
Capital Profit = Minority shares ratio 2,12,000
Revenue Profit = Minority shares ratio 7,500 2,19,500
NON CONTROLLING INTEREST (NCI) 6,19,500

GOOD WILL CALCULATION / CAPITAL RESERVE

PARTICULARS AMOUNT AMOUNT
Share Capital 8,00,000
LESS: 1. Face value of share (60,000 x 10) 6,00,000
2. Capital Profits (5,30,000 x 3/5) 3,18,000 9,18,000
GOODWILL / CAPITAL RESERVE 1,18,000