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CA Final · Financial Reporting · Classification and Measurement of Financial Assets and Financial Liabilities

On 1 April, Narmada Finance Ltd committed to lend Rs 50 lakh to a customer at a below-market interest rate. The commitment is not designated at FVTPL. The amount initially recognised for the commitment was Rs 2.0 lakh, and cumulative income recognised under Ind AS 115 up to the reporting date is Rs 0.5 lakh. The loss allowance under Section 5.5 at the reporting date is Rs 1.2 lakh. At what amount is the commitment measured at the reporting date?

The commitment is measured at Rs 1.5 lakh. It is the higher of the loss allowance of Rs 1.2 lakh and the initial amount of Rs 2.0 lakh less cumulative income of Rs 0.5 lakh, which equals Rs 1.5 lakh.

  1. ARs 1.2 lakh
  2. BRs 1.5 lakhCorrect
  3. CRs 2.0 lakh
  4. DRs 2.7 lakh

Explanation

Paragraph 4.2.1(d) requires the higher of the loss allowance (Rs 1.2 lakh) and the initial amount less cumulative income (2.0 minus 0.5 = Rs 1.5 lakh). The higher is Rs 1.5 lakh. Rs 1.2 lakh ignores the second limb, and Rs 2.7 lakh wrongly adds the income.

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