CAB Limited is in the process of preparation of the consolidated financial statements of the group for the year ending 31st March, 20X3 and the…

CA Final · Financial Reporting · MTP · November 2026
CAB Limited is in the process of preparation of the consolidated financial statements of the group for the year ending 31st March, 20X3 and the extract of the same is as follows: Particulars Attributable to CAB Limited Non-controlling interest Total (₹ in '000) Profit for the year 39,000 3,000 42,000 Other Comprehensive Income 5,000 Nil 5,000 Total Comprehensive Income 44,000 3,000 47,000 The long-term finance of the company comprises of the following: (i) 20,00,00,000 equity shares at the beginning of the year and the company has issued 5,00,00,000 shares on 1st July, 20X2 at full market value. (ii) 8,00,00,000 irredeemable preference shares. These shares were in issue for the whole of the year ended 31st March, 20X3. The dividend on these preference shares is discretionary. (iii) ₹ 18 crores of 6% convertible debentures issued on 1st April, 20X1 and repayable on 31st March, 20X5 at par. Interest is payable annually. As an alternative to repayment at par, the holder on maturity can elect to exchange their convertible debentures for 10 crores ordinary shares in the company. On 1st April, 20X1, the prevailing market interest rate for four-year convertible debentures which had no right of conversion was 8%. Using an annual discount rate of 8%, the present value of ₹ 1 payable in four years is 0.74 and the cumulative present value of ₹ 1 payable at the end of years one to four is 3.31. (iv) In the year ended 31st March, 20X3, CAB Limited declared an ordinary dividend of 0.10 paise per share and a dividend of 0.05 paise per share on the irredeemable preference shares. Required Compute the following: the finance cost of convertible debentures and its closing balance as on 31st March, 20X3 to be presented in the consolidated financial statements. the basic and diluted earnings per share for the year ended 31st March, 20X3. Assume that income tax is applicable to CAB Limited and its subsidiaries at 25%.

Suggested Answer and Working Notes:

Calculation of the liability and equity components on 6% Convertible debentures:Present value of principal payable at the end of 4th year (1,80,000 thousand x 0.74)= 1,33,200 thousandPresent value of interest payable annually for 4 years (₹ 1,80,000 thousand x 6% x 3.31)= 35,748 thousandTotal liability component = ₹ 1,68,948 thousandTherefore, equity component = ₹ 1,80,000 thousand – ₹ 1,68,948 thousand= ₹ 11,052 thousandCalculation of finance cost and closing balance of 6% convertible debentures Year Opening balance ₹ in '000 Finance cost @8% ₹ in '000 Interest paid @6% ₹ in '000 Closing balance ₹ in '000 a b = a x 8% c d = a+b-c 31.3.20X2 1,68,948 13,515.84 10,800 1,71,663.84 31.3.20X3 1,71,663.84 13,733.11 10,800 1,74,596.95 Finance cost of convertible debentures for the year ended 31.3.20X3 is ₹ 13,733.11 thousand and closing balance as on 31.3.20X3 is ₹ 1,74,596.95 thousand.Calculation of Basic EPS ₹ in '000 Profit for the year 39,000 Less: Dividend on preference shares (80,000 thousand x ₹0.05) (4,000) Profit attributable to equity shareholders 35,000 Weighted average number of shares = 20,00,00,000 + {5,00,00,000 x (9/12)}= 23,75,00,000 shares or 2,37,500 thousand sharesBasic EPS= ₹ 35,000 thousand / 2,37,500 thousand shares= ₹ 0.147Calculation of Diluted EPS ₹ in '000 Profit for the year 39,000 Less: Dividend on preference shares (80,000 x 0.05) (4,000) 35,000 Add: Finance cost (as given in the above table) 13,733.11 Less: Tax @ 25% (3,433.28) 10,299.83 45,299.83 Weighted average number of shares = 20,00,00,000 + {5,00,00,000 x (9/12)} + 10,00,00,000= 33,75,00,000 shares or 3,37,500 thousand sharesDiluted EPS= ₹ 45,299.83 thousand / 3,37,500 thousand shares= ₹ 0.134

Topics: Ind AS 109, Ind AS 33

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