Maximum Marks: 100
Time: 3 Hours

Instructions:

1. Attempt all questions.
2. Show detailed workings wherever applicable.
3. Use relevant Accounting Standards (Ind AS/AS) while answering.

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Section A: Theory & Conceptual Questions (20 Marks)

Answer any 4 questions. Each carries 5 marks.

1. Explain the concept of fair value as per Ind AS 113 and its significance in financial reporting.
2. Discuss the differences between Ind AS and IFRS in respect of revenue recognition.
3. Explain liability classification under Ind AS 1 and provide examples of current and non-current liabilities.
4. Describe the accounting treatment for share-based payments under Ind AS 102.
5. Discuss the impact of deferred tax on financial statements and the basis of recognition under Ind AS 12.

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Section B: Numerical / Practical Problems (50 Marks)

Answer any 5 questions. Each carries 10 marks.

1. Revenue Recognition: ABC Ltd. provides construction services under a contract. Total contract value ₹ 1,00,00,000; costs incurred till date ₹ 60,00,000; estimated total costs ₹ 90,00,000; revenue recognized till last year ₹ 40,00,000. Required: Determine revenue to be recognized this year using percentage-of-completion method.
2. Consolidation: Parent P Ltd. holds 80% of subsidiary S Ltd. Balance sheets as on 31st March: ParticularsP Ltd (₹)S Ltd (₹)Share Capital1,00,00,00050,00,000Reserves60,00,00020,00,000Investment in S40,00,000– Required: Prepare consolidated balance sheet ignoring fair value adjustments.
3. Financial Instruments: A company issues 5-year zero-coupon bonds of face value ₹ 10,00,000 at 90% of face value. Market rate = 12% p.a. Required: Journal entries for issuance and amortization using effective interest method for first year.
4. Leases (Ind AS 116): A company takes an asset on lease for 5 years, annual lease payment ₹ 5,00,000, interest rate implicit in lease = 10%, present value factor (5 yrs @10%) = 3.791. Required: Prepare lease liability and right-of-use asset on initial recognition.
5. Business Combination (Ind AS 103): X Ltd. acquires 100% of Y Ltd. Purchase consideration ₹ 50,00,000. Net assets of Y Ltd. Book value ₹ 40,00,000. Fair value adjustment +₹ 5,00,000. Required: Compute goodwill and journal entries in books of X Ltd.

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Section C: Case Study / Analytical Questions (30 Marks)

Answer any 2 questions. Each carries 15 marks.

1. Case Study: Financial Statement Analysis & Disclosure P Ltd. has investments in equity instruments designated at fair value through OCI. During the year, market value increased by ₹ 5,00,000, but no sale occurred. Required:
   a) Explain accounting treatment in books and financial statements.
   b) Discuss impact on P&L, OCI, and equity.
   c) Comment on disclosure requirements under Ind AS 1 and 109.
2. Case Study: Employee Benefits A company provides post-employment defined benefit plans. Actuarial valuation shows:
   • Present value of obligation = ₹ 2,00,00,000
   • Fair value of plan assets = ₹ 1,50,00,000
   Required:
   a) Journal entries for recognition of employee benefit expense.
   b) Explain accounting treatment of actuarial gains/losses under Ind AS 19.
   c) Impact on balance sheet and OCI.
3. Case Study: Impairment of Assets A company’s machinery has carrying amount ₹ 50,00,000. Recoverable amount = ₹ 42,00,000. Required:
   a) Prepare journal entries for impairment loss.
   b) Discuss reversal of impairment if recoverable amount rises in future.
   c) Explain disclosure requirements under Ind AS 36.

Solutions – CA Final: Financial Reporting

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Section A: Theory & Conceptual Questions (20 Marks)

1. Fair Value (Ind AS 113)
   • Definition: Price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date.
   • Significance: Ensures relevant, reliable, and comparable financial statements. Used for financial instruments, investment properties, and derivatives.
2. Differences between Ind AS and IFRS (Revenue Recognition) AspectInd ASIFRSStandardInd AS 115IFRS 15RecognitionRevenue recognized when control transfersSimilar principle, minor differences in applicationDisclosureExtensive notes as per Ind AS 115IFRS 15 requires similar disclosures
3. Liability Classification (Ind AS 1)
   • Current liabilities: Payable within 12 months or normal operating cycle (e.g., trade payables, short-term borrowings).
   • Non-current liabilities: Due after 12 months (e.g., long-term loans, bonds).
4. Share-based Payments (Ind AS 102)
   • Equity-settled: Expense recognized over vesting period with corresponding equity credit.
   • Cash-settled: Liability recognized and remeasured at fair value each period.
5. Deferred Tax (Ind AS 12)
   • Recognized for temporary differences between accounting and tax bases.
   • Impact: Adjusts profit and loss, and creates deferred tax assets/liabilities.
   • Example: Depreciation differences, provisions, employee benefits.

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Section B: Numerical / Practical Problems (50 Marks)

Q1: Revenue Recognition (Percentage-of-Completion Method)

• Contract Value = ₹ 1,00,00,000
• Costs incurred = ₹ 60,00,000
• Estimated total cost = ₹ 90,00,000
• Revenue recognized previously = ₹ 40,00,000

Step 1: % Completion$$\text{Percentage Completed} = \frac{60,00,000}{90,00,000} = 66.67\%$$Percentage Completed=90,00,00060,00,000​=66.67%

Step 2: Total Revenue to be recognized$$\text{Revenue to date} = 1,00,00,000 \times 66.67\% = 66,67,000$$Revenue to date=1,00,00,000×66.67%=66,67,000

Step 3: Revenue for this year$$\text{Revenue this year} = 66,67,000 – 40,00,000 = 26,67,000$$Revenue this year=66,67,000–40,00,000=26,67,000

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Q2: Consolidation (80% Subsidiary)

• Investment in S Ltd = ₹ 40,00,000
• S Ltd Net Assets = Share Capital 50,00,000 + Reserves 20,00,000 = 70,00,000
• Parent owns 80% → Share of Net Assets = 70,00,000 × 80% = 56,00,000

Step 1: Goodwill / Capital Adjustment$$\text{Investment} – \text{Share of Net Assets} = 40,00,000 – 56,00,000 = -16,00,000$$Investment–Share of Net Assets=40,00,000–56,00,000=−16,00,000

No goodwill since investment < share of net assets → capital reserve

Step 2: Consolidated Balance Sheet

Particulars	Amount (₹)
Share Capital	1,00,00,000
Reserves	60,00,000 + 20,00,000 (subsidiary) = 80,00,000
Capital Reserve	16,00,000
Total Liabilities & Equity	1,96,00,000

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Q3: Zero-Coupon Bonds (Effective Interest Method)

• Face Value = ₹ 10,00,000, Issue Price = 90% → ₹ 9,00,000
• Market rate = 12%

Step 1: Initial Recognition

Dr. Cash 9,00,000
Cr. Bonds Payable 9,00,000

Step 2: Amortization (Effective Interest)

• Interest expense = 9,00,000 × 12% = ₹ 1,08,000
• Carrying amount end of year = 9,00,000 + 1,08,000 = ₹ 10,08,000

Journal Entry for first year:

Dr. Interest Expense 1,08,000
Cr. Bonds Payable 1,08,000

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Q4: Leases (Ind AS 116)

• Annual payment = ₹ 5,00,000, PV factor = 3.791

Step 1: Initial Measurement$$\text{Lease Liability} = 5,00,000 × 3.791 = 18,95,500$$Lease Liability=5,00,000×3.791=18,95,500

Step 2: Right-of-Use Asset = 18,95,500

Journal Entry:

Dr. Right-of-Use Asset 18,95,500
Cr. Lease Liability 18,95,500

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Q5: Business Combination (Goodwill)

• Purchase consideration = ₹ 50,00,000
• Net assets = 40,00,000 + 5,00,000 (fair value adj) = 45,00,000

$$\text{Goodwill} = 50,00,000 – 45,00,000 = 5,00,000$$Goodwill=50,00,000–45,00,000=5,00,000

Journal Entry:

Dr. Investment in Y Ltd 50,00,000
Cr. Cash / Bank 50,00,000 Dr. Net Assets of Y Ltd 45,00,000
Cr. Goodwill 5,00,000
Cr. Capital of Y Ltd 40,00,000

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Section C: Case Study / Analytical Questions (30 Marks)

Q1: FVOCI Investments

• Increase in market value ₹ 5,00,000
• Not sold → No P&L impact, recorded in Other Comprehensive Income (OCI)
• Journal Entry:
• Dr. Investment – FVOCI 5,00,000
  Cr. FVOCI Reserve (OCI) 5,00,000

Impact: Equity increases; P&L unchanged; OCI recognized in equity section.

Disclosure: Note fair value, classification, and movement in OCI per Ind AS 1 & 109.

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Q2: Employee Benefits (Defined Benefit Plan)

• Obligation = 2,00,00,000, Plan assets = 1,50,00,000

Step 1: Recognize Net Defined Benefit Liability$$2,00,00,000 – 1,50,00,000 = 50,00,000$$2,00,00,000–1,50,00,000=50,00,000

Step 2: Journal Entry (Assume full expense recognized)

Dr. Employee Benefit Expense 50,00,000
Cr. Liability for Post-Employment Benefits 50,00,000

• Actuarial gains/losses → OCI, not P&L
• Balance Sheet Impact: Liability = 50,00,000, OCI adjusts equity

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Q3: Impairment of Assets (Ind AS 36)

• Carrying amount = 50,00,000, Recoverable = 42,00,000

Step 1: Impairment Loss$$50,00,000 – 42,00,000 = 8,00,000$$50,00,000–42,00,000=8,00,000

Journal Entry:

Dr. Impairment Loss (P&L) 8,00,000
Cr. Asset / Accumulated Depreciation 8,00,000

Reversal: If recoverable rises → reverse to extent of previous loss (not exceeding original carrying amount).

Disclosure: Nature, amount, events leading to impairment, and reversals under Ind AS 36.

Disclaimer:
This mock test is created for educational purposes only. Questions and solutions are original and inspired by typical CA Final exam patterns; they are not copied from any official CA exam papers.