Skip to content

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

On 1 April, Vedant Finance Ltd committed to lend Rs 50,00,000 to a customer at a below-market interest rate. The commitment was initially recognised at Rs 1,20,000, and it is not designated at FVTPL. Cumulative income recognised under Ind AS 115 up to the reporting date is Rs 40,000. The loss allowance under Section 5.5 is Rs 70,000. What is the subsequent carrying amount of the commitment?

The carrying amount is Rs 80,000. For a commitment to lend at a below-market rate, the issuer uses the higher of the loss allowance of Rs 70,000 and the initial amount of Rs 1,20,000 less cumulative income of Rs 40,000, which gives Rs 80,000.

  1. ARs 70,000
  2. BRs 1,20,000
  3. CRs 80,000Correct
  4. DRs 1,10,000

Explanation

Para 4.2.1(d) requires the higher of the loss allowance (Rs 70,000) and the initial amount less cumulative income (1,20,000 - 40,000 = Rs 80,000). The higher is Rs 80,000. Rs 70,000 is wrong because it picks the lower amount; Rs 1,20,000 ignores the income deduction.

Did you get it right without looking?

One question tells you little. A timed set on Classification and Measurement of Financial Assets and Financial Liabilities shows your real accuracy, how long you take and where you lose marks.

Practise Classification and Measurement of Financial Assets and Financial LiabilitiesFree diagnostic mock

More Classification and Measurement of Financial Assets and Financial Liabilities questions