Shaurya Limited is the company having its registered and corporate office at New Delhi. 60% of the Shaurya Limiteds shares are held by the Government of India and rest by other investors. This is the first time that Shaurya limited would be applying Ind AS for the preparation of its financials for the current financial year 2019-2020. Following balance sheet is prepared as per earlier GAAP as at the beginning of the preceding period along with the additional information: Balance Sheet as at 31 March 2018 (All figures are in 000, unless otherwise specified) Particulars Amount EQUITY AND LIABILITIES (1) Shareholders Funds (a) Share Capital 10,00,000 (b) Reserves & Surplus 25,00,000 (2) Non-Current Liabilities (a) Long Term Borrowings 4,50,000 (b) Long Term Provisions 3,50,000 (c) Deferred tax liabilities 3,50,000 (3) Current Liabilities (a) Trade Payables 22,00,000 (b) Other Current Liabilities 4,50,000 (c) Short Term Provisions 12,00,000 TOTAL 85,00,000 ASSETS (1) Non-Current Assets (a) Property, Plant & Equipment (net) 20,00,000 (b) Intangible assets 2,00,000 (c) Goodwill 1,00,000 (d) Non-current Investments 5,00,000 (e) Long Term Loans and Advances 1,50,000 (f) Other Non-Current Assets 2,00,000 (2) Current Assets (a) Current Investments 18,00,000 (b) Inventories 12,50,000 (c) Trade Receivables 9,00,000 (d) Cash and Bank Balances 10,00,000 (e) Other Current Assets 4,00,000 TOTAL 85,00,000 Additional Information (All figures are in 000) : 1. Other current liabilities include ` 3,90,000 liabilities to be paid in cash such as expense payable, salary payable etc. and ` 60,000 are statutory government dues. 2. Long term loans and advances include ` 40,000 loan and the remaining amount consists Advance to staff of ` 1,10,000. 3. Other non-current assets of ` 2,00,000 consists Capital advances to suppliers. 4. Other current assets include ` 3,50,000 current assets receivable in cash and Prepaid expenses of ` 50,000. 5. Short term provisions include Dividend payable of ` 2,00,000. The dividend payable had been as a result of board meeting wherein the declaration of dividend for financial year 2017-2018 was made. However, it is subject to approval of shareholders in the annual general meeting. Chief financial officer of Shaurya Limited has also presented the following information against corresponding relevant items in the balance sheet: a) Property, Plant & Equipment consists a class of assets as office buildings whose carrying amount is ` 10,00,000. However, the fair value of said office building as on the date of transition is estimated to be ` 15,00,000. Company wants to follow revaluation model as its accounting policy in respect of its property, plant and equipment for the first annual Ind AS financial statements. b) The fair value of Intangible assets as on the date of transition is estimated to be ` 2,50,000. However, the management is reluctant to incorporate the fair value changes in books of account. c) Shaurya Ltd. had acquired 80% shares in a company, Excel private limited few years ago thereby acquiring the control upon it at that time. Shaurya Ltd. recognised goodwill as per erstwhile accounting standards by accounting the excess of consideration paid over the net assets acquired at the date of acquisition. Fair value exercise was not done at the time of acquisition. d) Trade receivables include an amount of ` 20,000 as provision for doubtful debts measured in accordance with previous GAAP. Now as per latest estimates, the provision needs to be revised to ` 25,000. e) Company had given a loan of `1,00,000 to an entity for the term of 10 years six years ago. Transaction costs were incurred separately for this loan. The loan carries an interest rate of 7%. The principal amount is to be repaid in equal installments over the period of ten years at the year end. Interest is also payable at each year end. The fair value of loan as on the date of transition is ` 50,000 as against the carrying amount of loan which at present amounts to ` 40,000. However, Ind AS 109 mandates to charge the interest expense as per effective interest method after the adjustment of transaction costs. Management says it is tedious task in the given case to apply the effective interest rate changes with retrospective effect and hence is reluctant to apply the same retrospectively in its first time adoption. f) In the long term borrowings, ` 4,50,000 of component is due towards the State Government. Interest is payable on the government loan at 4%, however the prevailing rate in the market at present is 8%. The fair market value of loan stands at ` 4,20,000 as on the relevant date. g) Under Previous GAAP, the mutual funds were measured at cost or market value, whichever is lower. Under Ind AS, the Company has designated these investments at fair value through profit or loss. The value of mutual funds as per previous GAAP is ` 2,00,000 as included in current investment. However, the fair value of mutual funds as on the date of transition is ` 2,30,000. h) Ignore separate calculation of deferred tax on above adjustments. Assume the net deferred tax income to be ` 50,000 on account of Ind AS transition adjustments. Requirements: - Prepare transition date balance sheet of Shaurya Limited as per Indian Accounting Standards - Show necessary explanation for each of the items presented by chief financial officer in the form of notes, which may or may not require the adjustment as on the date of transition. (20 Marks)