Enquiry:

An entity had a loan from directors amounting to Rs. 100 as at December 31, 2014. It was classified as long term loan and with repayable terms of 5 years and it was interest free. It was discounted using effective interest rate method, resultantly; difference between present value and cash received was made part of equity. The same treatment has been mentioned in TR 32 para 3.1.

Share Capital and Reserves
Equity Reserve 20

Long term Loans
Loan from Directors 80

As on January 31, 2015 the terms were changed and it was decided that entity can pay the same on its own discretion and whenever they deem fit. (the same treatment has been mentioned in Para 3.3 of TR 32)

Now question is what will be the settlement accounting, whether I will only reclassify whole amount of 100 to equity or only reclassify 80. Whether there will be any consideration regarding restatement or no?

Opinion:

The Committee considered your query and response to your queries are as follows:

1) Since Rs. 20 is already in equity as of Dec 31, 2014, therefore, on Jan 31, 2015, Rs. 80 should be further transferred to equity. The entity can report the full amount of Rs. 100 as equity contribution as a separate line item on balance sheet and in a separate column in statement of changes in equity and provide appropriate disclosure.

(2) Restatement would not be appropriate because the terms of the loan changed after Dec 31, 2014.

(April 18, 2016)