Sun Ltd. acquired a software from Earth Ltd. in exchange for a telecommunication license. The telecommunication license is carried at 5,00,000 in…

CA Final · Financial Reporting · MTP · September 2025
Sun Ltd. acquired a software from Earth Ltd. in exchange for a telecommunication license. The telecommunication license is carried at 5,00,000 in the books of Sun Ltd. The Software is carried at 10,000 in the books of the Earth Ltd. which is not the fair value. Pass journal entries in the following situations in the books of Sun Ltd. and Earth Ltd.: 1) Fair value of software is 5,20,000 and fair value of telecommunication license is 5,00,000. 2) Fair value of software is not measurable. However, similar telecommunication license is transacted by another company at 4,90,000. 3) Neither fair value of software nor telecommunication license could be reliably measured.

Suggested Answer and Working Notes:

(i) Situation Sun Ltd. Earth Ltd. 1 Software Dr. 500 Telecommunication license Dr. 520 To Telecommunication license 500 To Software 10 To Profit on Exchange Nil To Profit on Exchange 510 2 Software Dr. 490 Telecommunication license Dr. 490 To Telecommunication license 490 To Software 10 To Profit on Exchange Nil To Profit on Exchange 480 3 Software Dr. 500 Telecommunication license Dr. 10 To Telecommunication license 500 To Software 10 Note: The company may first recognize Impairment loss and then record an entry. The effect is the same as impairment loss will also be charged to Income Statement.

Topics: Ind AS 38

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic