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CMA Final · Corporate Financial Reporting · Accounting of Financial Instruments

Which statement about Appendix D of Ind AS 109 on extinguishing financial liabilities with equity instruments is correct?

Appendix D deals with the debtor entity that issues equity to extinguish a liability and does not address creditor accounting. The equity is measured at the extinguishment date, and any difference between carrying amount and consideration goes to profit or loss.

  1. AIt addresses the accounting by the debtor entity, not the creditorCorrect
  2. BIt addresses the accounting by the creditor, not the debtor
  3. CThe equity instruments are measured at the date the agreement is first negotiated
  4. DThe gain or loss is taken directly to other equity

Explanation

The scope of Appendix D covers the entity that issues equity to a creditor; it does not address the creditor's accounting. The equity is recognised and measured at the date the liability is extinguished, and the difference is recognised in profit or loss, not in equity.

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