FINAL EXAMINATION SET - 1

MODEL ANSWERS TERM – DECEMBER 2023

PAPER – 18 SYLLABUS 2022
CORPORATE FINANCIAL REPORTING
Time Allowed: 3 Hours Full Marks: 100
The figures in the margin on the right side indicate full marks.

SECTION – A (Compulsory)

1. Choose the correct option: [15 x 2 = 30]

(i) The Income approach for Valuation of Shares includes the models/Techniques:
a. Discounted Cash Flow
b. Dividend Discount Model
c. Maintainable Profits Basis
d. All of the above

(ii) Ind As 109 deals with _______________.

a. recognition and measurement of financial instruments and hedge accounting
b. presentation of financial instruments
c. disclosure of financial instruments
d. None of the above

(iii) IND AS is applicable to NBFCs on and from ____________.

a. 1.4.2016
b. 1.4.2017
c. 1.4.2015
d. 1.4.2018

(iv) In business combination, control of business can be obtained by

_________________.
a. acquiring assets and assuming liabilities (such assets and liabilities must
constitute a business, otherwise it is not a business combination)
b. by acquisition of shares
c. by other legal process
d. All of the above

(v) As per Ind AS 112: Disclosure of Interests in Other Entities, an entity shall disclose
information about significant judgements and assumptions it has made (and
changes to those judgements and assumptions) in determining:

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CORPORATE FINANCIAL REPORTING

a. that it has control of another entity, i.e. an investee as described in paragraphs

5 and 6 of Ind AS 110, Consolidated Consolidated Financial Statements
b. that it has joint control of an arrangement or significant influence over
another entity
c. the type of joint arrangement (i.e. joint operation or joint venture) when the
arrangement has been structured through a separate vehicle
d. All of the above

(vi) A Ltd acquires B Ltd by purchasing 70% of its equity for ₹ 17.5 lakh in cash. The
fair value of non – controlling interest in determined as ₹12 lakh. The value of net
identifiable assets and liabilities, as measured in accordance with Ind-AS 103 is
determined as ₹ 8 Lakh. How much goodwill is recognized?
a. ₹21.5 Lakh
b. ₹ 19.5 Lakh
c. ₹ 12.7 Lakh
d. None

(vii) Ind AS 16 does not apply to which of the following?

a. PPE classified as held for sale as per Ind AS 105
b. Biological assets (other than bearer plants) related to agricultural activity
c. Assets in exploration for and evaluation of Mineral Resources
d. All of the above

(viii) On 01.08.2021 A Ltd. enter into a contract with a hotel for daily sanitisation of
the building for 3 years at ₹12,000 per month. The customer receives and consume
benefits each day. Determine the revenue to be recognized in 2021-22.
a. ₹12,000
b. ₹4,32,000
c. ₹96,000
d. None of the above

(ix) The ways of determining the value of goodwill using the capitalisation approach
____________
a. Capitalisation of Average Profits
b. Capitalisation of Super Profits
c. Both a and b

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CORPORATE FINANCIAL REPORTING
d. Capitalisation of Average Future maintainable profit

(x) From the following particulars you are required to determine value of goodwill of
ABX Ltd.
Super Profit (Computed) : ₹ 4,50,000
Normal rate of return : 12%
Present value of annuity of ₹1 for 4 years @ 12% : 3.0374
a. ₹13,66,830
b. ₹54,000
c. ₹5,04,000
d. ₹4,50,000

(xi) An investment entity is an entity that _________________.

a. obtains funds from one or more investors for the purpose of providing those
investor(s) with investment management services
b. commits to its investor(s) that its business purpose is to invest funds solely for
returns from capital appreciation, investment income, or both
c. measures and evaluates the performance of substantially all of its investments
on a fair value basis
d. All of the above

(xii) Which of the following is not a general principal of Government Accounting?

a. Reporting of Utilisation of Public Funds
b. Expenditures are classified under Sectors, major heads, minor heads, sub-
heads and detailed heads of Accounts
c. Budget Based
d. Single Entry System

(xiii) As per Ind AS 103, accounting and reporting for business combination is done under
________________.
a. Acquisition Method
b. Purchase method
c. Pooling of interest method
d. None of the above

(xiv) International Integrated Reporting Council (IIRC) launched IR as a global

framework in _____________.
a. November 2013
b. December 2012

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CORPORATE FINANCIAL REPORTING
c. November 2012
d. December 2013

(xv) Consolidated Fund of India is the fund referred to in ____________ of the

Constitution of India.
a. Article 266(1)
b. Article 266(2)
c. Article 266(3)
d. Article 266(4)

Answer:

(i) d (ii) a (iii) d (iv) d (v) d

(vi) a (vii) d (viii) c (ix) c (x) a
(xi) d (xii) d (xiii) c (xiv) d (xv) a

SECTION - B
(Answer any 5 questions out of 7 questions given. Each question carries 14 marks.)
[5 x 14 = 70]

2. (a) On 1.4.2020, Vishnu Limited installed a machine in the rented premises at a

cost of ₹ 25 lakh, whose life is 3 years. As per the rental agreement, the machine
should be decommissioned and the building should be brought into the
original position. The company should incur ₹4,00,000 at the end of the 3rd
year to restore the premises into the original position. Assume borrowing rate
applicable to the entity is 10%. Record the journal entries. [7]

(b) A Ltd. Has a machine whose original cost was ₹45,000. The accumulated
depreciation on the machine is ₹15,000. Similar machine has recently been
sold in the same locality at ₹25,000 with selling expenses ₹2,000. Management
determined the entity specific present value of future cash flows of the
machine as ₹28,000.
Compute:
(i) Fair value less cost to sell
(ii) Recoverable amount
(iii) Impairment loss
(iv) Carrying amount of the machine after impairment. [7]

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MODEL ANSWERS TERM – DECEMBER 2023
PAPER – 18 SYLLABUS 2022
CORPORATE FINANCIAL REPORTING
Answer:
2.(a) As per Ind. AS 16 cost includes recommissioning (or) restoration cost. The entity
should capitalize the PV of such costs to be incurred in the future for discounting.
We should use before tax borrowings rate applicable to the specific entity.
Considering the above PV of decommissioning cost @ 10% (PVF 0.751).

₹4,00,000 x 0.751 = ₹3,00,400

Total cost of PPE to be capitalized = ₹25,00,000 + ₹3,00,400 = ₹28,00,400

2. (b)

i. Fair value less cost to sell = ₹25,000 – ₹2,000 = ₹23,000

ii. Recoverable amount is the higher of the fair value less cost to sell and value in
use i.e. higher of ₹ 23,000 and ₹ 28,000 i.e. ₹ 28,000
iii. Impairment loss is the carrying amount before impairment less the recoverable
amount = ₹ (45,000 – 15,000) - ₹ 28,000 = ₹ 2,000
iv. Carrying and after impairment = ₹ 30,000 – ₹ 2,000 = ₹28,000 (equal to
recoverable amt.) If the machine were revalued and there remains any
revaluation profit accumulated balance as OCI under other equity, that should
be used first and then Profit and Loss A/c will be used to close the Impairment
Loss A/c.

3. (a) On 01.01.2022 A Ltd. entered into a contract with B to sell 20 TV sets at a

price of ₹50,000 per set and the goods were delivered in February, 2022.
Determine revenue to be recognised by A in 2021-22 in the following
circumstances:
(i) 2 sets found damaged at the time of receiving and returned by B.
(ii) 4 sets found not properly functioning in March, 2022 and they were
replaced by A as per terms of warranty.
(iii) It is not a sale but goods sent on consignment and B will sell the TV sets
at ₹50,000 per set. 12 sets were sold by B.
(iv) It is a contract of sale or return. The TV sets can be returned by B
unconditionally within 3 months. The entity expects (a) full return; (b)
50% return [7]

(b) The Capital Structure of M/s XYZ Ltd. on 31st March, 2022 was as follows:
₹
Equity Capital 18,000 Shares of ₹100 each 18,00,000
12% Preference Capital 5,000 Shares of ₹100 each 5,00,000

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MODEL ANSWERS TERM – DECEMBER 2023
PAPER – 18 SYLLABUS 2022
CORPORATE FINANCIAL REPORTING
12% Secured Debentures 5,00,000
Reserves 5,00,000
Profit earned before interest and taxes during the year 7,20,000
Tax Rate 40%

Generally the return on equity shares of this type of Industry is 15%. Subject
to:
(i) The profit after tax covers fixed interest and Fixed Dividends at least 4
times.
(ii) The Debt Equity ratio is at least 2:
(iii) Yield on shares is calculated at 60% of distributed profits and 10% of
undistributed profits.
The Company has been paying regularly an Equity dividend of 15%.
The risk premium for Dividends is generally assumed at 1%.
Find out the value of Equity shares of the Company. [7]

Answer:

3.(a)
(i) Revenue is recognised for 18 sets at ₹ 9,00,000. 2 sets returned to inventory of
defective items.
(ii) Revenue is recognised for 20 sets at ₹10,00,000 at delivery (assumed warranty is
required by law and subsequent replacement is not considered as performance
obligation to be satisfied over time and to attract any allocation of contract price).
(iii) Revenue is recognised for 12 sets at ₹6,00,000. The other 8 sets are recognised as asset
(inventory) at cost.
(iv) (a) No revenue is recognised on delivery as right of the customer to unconditionally
return the goods has not expired and full return is expected. The amount received or
receivable on delivery of the sets is recognised as a liability and asset (inventory) is
recognised for all 20 sets at cost. The performance obligation will be satisfied at the
point of time when that right to return will expire and then only revenue will be
recognised cancelling the liability.
(b) Revenue will be recognised at ₹5,00,000 (50% of delivery) and for balance
₹5,00,000, liability will be recognised. Further, asset (inventory) should be
recognised for 10 sets at cost.

3. (b) WN (1) -
a) Profit available to ESH

Particulars ₹
Profit before interest & tax 7,20,000

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CORPORATE FINANCIAL REPORTING
(-) Interest on debentures 60,000
[52@112%]
PBJ 6,60,000
(-) Tax @40% 2,64,000
PAT 3,96,000
(-) Preference dividend 60,000
(5Le 12%)
Profit to EsH 3,36,000

b) Distributed & Undistributed Profits:

Particulars ₹
Profit to ESH 3,36,000
(-) Distributed profit 2,70,000
(18L @ 15%)
Retained earnings 66,000

WN (2):Value per E.S under yield basis:

Yield = 60% of distributed profits + 10% of undistributed profits

Yield = ₹1,62,000 +₹ 6,600 = ₹1,68,600

168600
Yield Percentage =  100  9.37%
1800000

Yield per E.S = ₹ 9.37 per ES

WN(3): Interest & fixed Dividend coverage ratio:

PAT  int
=
int erest  pre. dividend

396000  60000
=  3.8
120000

4 times given in question but actual ratio calculated is 3.8 times it is below the required
rate.

LT Debt
WN(4): Debt equity ratio =
ESC  PSC  Re serves
5L
= =0.17857
18 L  5L  5L

As given it should be 2, but actual is 0.17857 so risk premium is to be considered

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CORPORATE FINANCIAL REPORTING
As ratios are below required, we have to calculate adjusted NRR

WN(5): Adjusted NRR:

Industry Avg rate = 15%

(+) risk premium = 1%
Adjusted NRR = 16%

Yield 9.37
Value Per E.s= =  58.56
Adj NRR 16%

4. (a) While closing its books of accounts as on 31.12.2022 a non-banking finance

company (NBFC) has its advances classified as under:
₹ in lakhs
Standard Assets 10,000
Sub-standard portion of doubtful debts 1,000
Secured portions of doubtful debts:
- Upto one year 160
- One year to three years 70
- More than three years 20
Unsecured portions of doubtful debts 90
Loss assets 30

Calculate the provision to be made against advances by NBFC as per

prudential norms. [7]

(b) On 01.04.2021 the summarised balance sheets of Satellite Ltd. and Planet Ltd.
are provided as:
(₹’000)
Particulars Satellite Ltd. Planet Ltd.
B/S (₹) Fair Value B/S (₹)
(₹)
Equity Share Capital (₹10) 8,000 12,000
Other Equity 6,000 4,000
Borrowings 2,000 2,050 3,000
Trade Payables 2,500 2,400 2,000
Property, Plant and 9,000 10,000 12,000
Equipment

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Investment Property 5,000 7,000 1,000

Investments 1,000 3,500
Current Assets 3,500 3,200 4,500
Contingent Liabilities 800 750

Market price of equity shares of Planet Ltd. and Satellite Ltd. are ₹16 and ₹15
respectively on the day. On the basis of the above data, you are required to
make the necessary accounting for the following cases.
Planet Ltd. takes over Satellite Ltd. and purchase consideration is settled by
issue of 1050000 equity shares. Pass journal entries in the books of Satellite
Ltd. the companies and re-draft the balance sheet of Planet Ltd. after the
business combination. [7]

Answer:
4. (a)
Particular Loan Provision % Provision Amount
(Lakhs)
Standard Assets 10000 0.40% 40
Sub-Standard Assets 1000 10% 100
Secured Portion of Doubt full debt.
Upto 1 year 160 20% 32
1 year to 3 years 70 30% 21
More than 3 years 20 50% 10
Unsecured portion of 90 100% 90
Doubt full debts
Loss Assets 30 100% 30
323

4. (b)
In the books of Satellite Ltd.

Journal (₹’000)
Date Particulars Dr. Cr.
(₹) (₹)
Realisation A/c Dr. 18,500
To, Property, Plant and Equipment A/c 9,000
To, Investment Property A/c 5,000
To, Investments A/c 1,000
To, Current Assets A/c 3,500
Equity Shares in Planet Ltd. Dr. 16,800

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Borrowings Dr. 2,000

Trade Payables Dr. 2,500
21,300
To, Realisation A/c
Realisation A/c Dr. 2,800
To, Equity Shareholders A/c 2,800
Equity Share Capital A/c Dr. 8,000
Other Equity Dr. 6,000
To, Equity Shareholders A/c 14,000
Equity Shareholders A/c Dr. 16,800
To, Equity Shares in Planet Ltd. 16,800

WN 1. Net Assets of Satellite Ltd. at fair value: (₹’000)

Particulars (₹) (₹)
Property, Plant and Equipment 10,000
Investment Property 7,000
Investments 1,000
Current Assets 3,200
Total Assets 21,200
Borrowings 2,050
Trade Payables 2,400
Liabilities (Recognised) 750
Total Liabilities 5,200
Net assets 16,000

Summarised Balance sheet of Planet Ltd. as at 01.04.2021 (after take over) (₹’000)
Particulars Workings (₹) (₹)
Property, Plant and Equipment 12,000 + 10,000 22,000
Goodwill 800
Investment Property 4,000 + 4,000 8,000
Investments 3,500 + 1,000 4,500
Current Assets 4,500 + 3,200 7,700
Total Assets 43,000
Equity Share Capital 12,000 + 10,500 22,500
Other Equity 4,000 + 6,300 10,300
Borrowings 3,000 + 2,050 5,050
Trade Payables 2,000 + 2,400 4,400

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CORPORATE FINANCIAL REPORTING

Liabilities (contingent recognised) 750

Total Equity and Liabilities 43,000

5. On March 31, 2022, P Ltd acquired 100% shares of Q Ltd. P Ltd. issued 3,00,000
equity shares (₹10) that were trading at ₹16 on March 31.
The summarized Balance Sheets of the companies as at March 31, 2022 (before
acquisition):
(Amount in ₹)
(Book Value) (Market Value)
Partclars P Ltd. Q Ltd. P Ltd Q Ltd
Net Assets 80,00,000 42,00,000 110,00,0000 45,00,000
Equity Sh. Cap 60,00,000 25,00,000
Other Equity 20,00,000 17,00,000

Show acquisition journal entry under Ind AS 103 and summarized balance sheet
after business combination. Also show the necessary accounting in the books of the
Acquiree.
[14]
Answer:
Purchase consideration (at fair value) = 3,00,000×`16 = ` 48,00,000; FV of Net Assets
` 45,00,000
Goodwill = Consideration – Net Assets = ` (48,00,000 – 45,00,000) = ` 3,00,000.

Journal (individual set of P Ltd.)

Particulars Dr. (`) Cr. (`)
Net Assets A/c Dr. 45,00,000
Goodwill A/c Dr. 3,00,000
To, Consideration A/c 48,00,000
Consideration A/c Dr. 48,00,000
To, Equity Share Capital A/c 30,00,000
To, Security Premium A/c 18,00,000

Summarized Individual Balance sheet of K Ltd. as at March 31 (Post-acquisition)

Particulars (`) (`)

Net Assets:

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Carrying amount of Acquirer P Ltd. 80,00,000
Fair Value of Acquiree Q Ltd. 45,00,000 1,25,00,000
Goodwill 3,00,000
Total Net Assets 1,28,00,000
Equity:
Equity Share Capital
Existing 60,00,000
Issue for consideration 30,00,000 90,00,000
Other Equity:
Carrying amount 20,00,000
Security Premium (on issue of shares) 18,00,000 38,00,000
Total Equity and Liabilities 1,28,00,000

No consolidated or separate set is required.

In books of Q
Accounts are closed through Realisation Account

Particulars Dr. (`) Cr. (`)

Realisation A/c Dr. 42,00,000
To, Net Assets A/c 42,00,000
Equity Shares in K Ltd. A/c Dr. 48,00,000
To, Realisation A/c 48,00,000
Realisation A/c Dr. 6,00,000
To, Equity Shareholders’ A/c 6,00,000

Particulars Dr. (`) Cr. (`)

Equity Share Capital A/c Dr. 25,00,000
Other Equity A/c Dr. 17,00,000 42,00,000
To, Equity Shareholders’ A/c
Equity Shareholders’ A/c Dr. 48,00,000
To, equity Shares in K Ltd. 48,00,000

Dr. Realisation Account Cr.

Particulars (`) Particulars (`)
Net Assets A/c 42,00,000 Equity Shares in P A/c 48,00,000
Equity Shareholders’ A/c 6,00,000
48,00,000 48,00,000

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Dr. Equity Shareholders’ Account Cr.

Particulars (`) Particulars (`)

Equity Shares in P Ltd. A/c 48,00,000 Equity Share Capital A/c 25,00,000
Other Equity A/c 17,00,000
Realisation A/c 6,00,000
48,00,000 48,00,000

Now, what changes take place in accounting in the books of the Acquirer and the
Acquiree if the following changes take place:
a. P Ltd acquired 100% shares of Q Ltd.
b. P Ltd acquired 80% shares of Q Ltd.
[for guidance you may also follow the solutions in illustration 1(b) and 1(c)]

6. P acquires 60% shares in Q on 01.10. 2021 at ₹30,000. Q makes profits of ₹20,000 in

the year 2021-22 and declared dividend of ₹9,000. NCI is valued at proportionate
net assets. Abstracts of Separate Balance Sheet of P (Dividend from subsidiary not
accounted) and Individual Balance Sheet of Q as at 31.03.2022:

(₹ in Lakhs)
P Q
PPE 50,000 30,000
Investment in shares of Q at cost 30,000
Current Assets 20,000 28,000
1,00,000 58,000
Equity Share Capital (₹10) 60,000 25,000
Other Equity 25,000 15,000
Current Liabilities
Trade Payables 15,000 9,000
Dividend Payable 9,000
1,00,000 58,000
Prepare: Consolidated Balance Sheet and Separate Balance Sheet of P. [14]

Answer:
Consolidated Balance Sheet and Separate Balance Sheet of P

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(` in Lakhs)
In P’s Book
Separate Consolidated
Goodwill (3) 6,600
PPE = `(50,000 + 30,000) 50,000 80,000
Investment in shares of Q `(30,000 – 2,700 Pre-acquisition 27,300
Dividend)
Current Assets `(20,000 + 5,400 Dividend Receivable) 25,400 48,000#
1,02,700 1,34,600
Equity Shares 60,000 60,000
Other Equity (5) 27,700 31,000
NCI (4) 16,000
Current Liabilities
Trade Payables 15,000 24,000
Dividend Payable (to NCI) 3,600
1,02,700 1,34,600

# (20000 + 28000 = 48000); In Consolidated balance sheet Inter-company dividend is set off
and does not appear.

Working Notes:
1. Analysis of profits of Q:
Opening P/L = Other Equity at the end + Dividend – Profits for the year
= `(15,000 + 9,000 - 20,000)
= `4,000
2. Net Assets identified on acquisition in the mid of the year, represented by Value of
Equity of Q
= `25,000 + Pre acquisition profits (Opening P/L + 50% of yearly profit)
= `(25,000 + 4,000 + 10,000)
= `39,000 (A)
3. Goodwill =B+C-A
= `(15,600 + 30,000 – 39,000)
= `6,600
Where: A = `39,000
B NCI = 40% × `39,000 = `15,`600
C Consideration = Investment in shares of Q = `30,000.

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4. NCI at the reporting date
= NCI at acquisition + Share of NCI in post-acquisition profits of Q – Dividend payable
to NCI
= `15,600 + 40% × `10,000 (50% of yearly profit) - 40% × 9000 (dividend payable to
be shown separately)
= `15,600 + `4,000 – `3,600
= `16,000.
5. Consolidated Other Equity
= P’s Other Equity + Share from Post acquisition profits of Q
= `25,000 + 60% × `10,000
= `31,000
6. Separate Other Equity = `25,000 + ` 2,700 (post-acquisition profits)
= `27,700

7. (a) LG. and Co. provides you with the following as at 31st March, 2022.
(₹ in lakhs)
Liabilities ₹ Assets ₹
Share Capital 1,000 Fixed Asset (Net) 3,000
Reserves and surplus 2,000 Investments 150
Long term debt 200 Current assets 100
Sundry creditors 50
Total 3,250 Total 3,250

Additional information provided is as follows:

i. Profit before interest and tax is ₹ 1,000 Lakhs
ii. Interest: ₹ 20 Lakhs
iii. Tax: 35.875%
iv. Risk Free Rate – 10%
v. Market Rate – 15%
vi. Beta (𝜷) Factor – 1.4
Compute economic value added. [7]

(b) Discuss the suggested frame work for business responsibilities. [7]

Answer:

7. (a)

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Total Assets 3,250
(-) Creditors (50)
CE 3,200

Ke = R f+B(Rm-RF)
= 10 + 1.4 (15-10)
Ke =17
20 L
Kd before tax =  100  10%
200 L
Kd after tax = 10(1-35.875%)=6.4125%
 3000   200 
Ko= 17   6.1425  =15.9375+0.4
 3200   3200 
Ko=16.34%

NOPAT =EBIT(1-T)=1000-(1.035875) = ₹ 641.25 Lakhs

EVA = NOPAT-(CE X KD)=641.25 – (3200-16.34%)= ₹118.37 Lakhs

7. (b) Suggested Framework for Business Responsibility Report

There are five sections (A, B, C, D and E) in the suggested format. [ANNEXURE I to SEBI
Circular]
Section A: General Information about the Company
1. Corporate Identity Number (CIN) of the Company
2. Name of the Company
3. Registered address
4. Website
5. E-mail id
6. Financial Year reported
7. Sector(s) that the Company is engaged in (industrial activity code-wise)
8. List three key products/services that the Company manufactures/provides (as in
balance sheet)
9. Total number of locations where business activity is undertaken by the Company
i. Number of International Locations (Provide details of major 5)
ii. Number of National Locations

10. Markets served by the Company – Local/State/National/International

Section B: Financial details of the company
1. Paid up Capital (INR)

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Directorate of Studies, The Institute of Cost Accountants of India
 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
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CORPORATE FINANCIAL REPORTING
2. Total Turnover (INR)
3. Total profit after taxes (INR)
4. Total Spending on Corporate Social Responsibility (CSR) as percentage of profit after
tax (%)
5. List of activities in which expenditure in 4 above has been incurred
Section C: Other details
a. Does the Company have any Subsidiary Company/ Companies?
b. Do the Subsidiary Company/Companies participate in the BR Initiatives of the
parent company? If yes, then indicate the number of such subsidiary company(s)
c. Do any other entity/entities (e.g., suppliers, distributors etc.) that the Company does
business with, participate in the BR initiatives of the Company? If yes, then indicate
the percentage of such entity/ entities? [Less than 30%, 30- 60%, More than 60%]
Section D: BR information
1. Details of Director/Directors responsible for BR

8. (a) List the responsibilities of GASAB. [5]

(b) Write briefly about IGAS-3. [5]

(c) On 01.04.2020 BB Ltd. acquired 90% share of CM Ltd. at ₹10,80,000, when

the fair value of its Net Assets was ₹10,00,000. During 01.04.2020 to 31.03.21
CM Ltd. made TCI ₹ 2,00,000. On that date BM sold 15% holding to outsiders
at ₹2,20,000. Pass journal entries for sale of partial holding retaining control.
[4]
Answer:

8.(a) Responsibilities of GASAB

GASAB, inter alia, has the following responsibilities:
1. To formulate and improve standard of Government accounting and financial reporting
in order to enhance accountability mechanisms.
2. To formulate and propose standards that improve the usefulness of financial reports
based on the needs of the users.
3. To keep the standards current and reflect change in the Governmental environment.
4. To provide guidance on implementation of standards.
5. To consider significant areas of accounting and financial reporting that can be improved
through the standard setting process.

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Directorate of Studies, The Institute of Cost Accountants of India
 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
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CORPORATE FINANCIAL REPORTING
6. To improve the common understanding of the nature and purpose of information
contained in the financial reports.

8.(b) IGAS - 3 Loans and Advances Made by Government

The Government of India has been empowered under proviso (2) of Article 293 of the
Constitution of India to make loans to the States, subject to such conditions as may be laid
down by or under any law made by Parliament, any sums required for the purpose of making
such loans being chargeable to the Consolidated Fund of India.
The Union Government has been providing financial assistance to the State Governments, a
substantial portion of which is in the form of loans. These loans are advanced to the States
both in the form of plan and non-plan assistance intended for both developmental and non-
developmental purposes. Loans are also provided by the Union Government to Foreign
Governments, Government companies and Corporations, Non-Government institutions and
Local bodies. The Union Government also disburses recoverable advances to Government
servants.
The State Governments disburse loans to Government Companies, Corporations, Local
Bodies, Autonomous Bodies, Cooperative Institutions, Statutory Corporations, quasi-public
bodies and other non-Government/private institutions. The State Governments also disburse
recoverable advances to Government servants.
Objective: The objectives of the Standard are:
 to lay down the norms for Recognition, Measurement, Valuation and Reporting in
respect of Loans and Advances made by the Union and the State Governments in their
respective Financial Statements to ensure complete, accurate, realistic and uniform
accounting practices, and
 to ensure adequate disclosure on Loans and Advances made by the Governments
consistent with best international practices.
Scope: This Standard applies to Loans and Advances given by the Government for
incorporation and presentation in the Financial Statements of the Government. Financial
Statements shall not be described as complying with this Standard unless they comply with
all the requirements contained therein. This standard shall apply only to government accounts
being maintained on a cash basis.

8.(c) Net Assets on 31.03.2021 = `10,00,000 + `2,00,000 (TCI) = `12,00,000

Carrying amount of 15% holding sold ie. NCI recognized (assumed at proportionate
net asset)
= 15% ×`12,00,000 = `1,80,000
Sale Price = `2,20,000
Gain credited to Other Equity = `2,20,000 – `1,80,000 = `40,000

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Directorate of Studies, The Institute of Cost Accountants of India
 FINAL EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023
PAPER – 18 SYLLABUS 2022
CORPORATE FINANCIAL REPORTING

Journal Entry
Particulars Dr. Cr.
₹ ₹
Bank A/c Dr. 2,20,000
To, NCI A/c 1,80,000
To, Other Equity A/c 40,000

Alternative Solution

NCI assumed to be recognized at fair value:

Carrying amount of 15% holding sold ie. NCI recognized (at fair value) = 15% ×
₹10,80,000 + 15% of ₹2,00,000 (TCI) = ₹1,92,000
Sale price = ₹2,20,000
Gain credited to Other Equity = ₹2,20,000 – ₹1,92,000 = ₹28,000
Journal Entry
Particulars Dr. Cr.
₹ ₹
Bank A/c Dr. 2,20,000
To, NCI A/c 1,92,000
To, Other Equity A/c 28,000

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Directorate of Studies, The Institute of Cost Accountants of India