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CA Final · Financial Reporting · Financial Instruments: Equity and Financial Liabilities

Which of the following correctly identifies the scope of Appendix D of Ind AS 109 for Ashoka Steels Ltd, a debtor that renegotiates its term loan and issues shares to its lender?

Appendix D addresses the debtor's accounting when renegotiation leads to issuing equity instruments to a creditor to extinguish all or part of a financial liability. It does not address the creditor's accounting, so the lender's treatment is outside its scope.

  1. AIt addresses the accounting by the creditor on receiving the shares
  2. BIt addresses the accounting by the debtor when renegotiated terms result in issuing equity instruments to extinguish all or part of the liabilityCorrect
  3. CIt applies only where the entire liability is extinguished, not part
  4. DIt applies only to liabilities having a demand feature

Explanation

The scope paragraph says Appendix D addresses accounting by an entity whose financial liability is renegotiated and results in issuing equity instruments to a creditor to extinguish all or part of it. It expressly does not address the creditor's accounting. It is not limited to full extinguishment or demand features.

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