(a) PK Ltd. has a net worth of 450 crore. It manufactures bathroom accessories. The sales...

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(a) PK Ltd. has a net worth of 450 crore. It manufactures bathroom accessories. The sales of the company are affected due to low demand. The company has provided following information: Particulars Net Profit Sales (Turnover) Amount (in crore) for year ended 31.3.2021 31.3.2020 31.3.2022 3.50 600.00 7.75 850.00 4.25 700.00 31.3.2019 4.00 710.00 During the financial year 2021-2022, PK Ltd. decided that on sale of certain selected items of bathroom accessories @ 0.50 paisa per unit sold will be contributed to the 'Save Water Foundation' which will qualify as a Corporate Social Responsibility (CSR) expense as per Schedule VII to the Companies Act, 2013. Consequently, by the year end, the Company recognized, 1,50,000 as CSR expenditure. However, only 50% of the aforesaid amount was paid to the Foundation by the end of the year ending 31st March, 2022. Discuss: (i) Whether PK Ltd. has an obligation to form a CSR committee as the applicability criteria is not satisfied in the financial year 2021-2022? The net worth has always remained below the applicability threshold. (ii) Whether 1,50,000 will qualify as CSR expenditure under section 135 of the Companies Act, 2013? (6 Marks) (b) ANANDAM Ltd. enters into a contract with a customer on 1st April, 2019 for sale of a machine and spare parts. The manufacturing lead time for the machine and spare parts is 3 years. On completion of manufacturing, ANANDAM Ltd. demonstrates that the machine and spare parts meet the agreed-upon specifications in the contract. The promises to transfer the machine and spare parts are distinct and result in two performance obligations each of which will be satisfied at a point in time. On 31st March, 2022, the customer pays for the machine and spare parts, but only takes the physical possession of the machine. Although the customer inspects and accepts the spare parts, the customer requests that the spare parts be stored at ANANDAM Ltd.'s warehouse because of its close proximity to the customer's factory. The customer has legal title to the spare parts and the parts can be identified as belonging to the customer. ANANDAM Ltd. stores the spare parts in a separate section of its warehouse and the parts are ready for immediate shipment at the customer's request. ANANDAM Ltd. expects to hold the spare parts for one to three years and does not have the authority to use the spare parts or direct them to another customer. Determine how the revenue will be recognized by ANANDAM Ltd. for the different performance obligations as per Ind AS 115? (6 Marks) (c) Card Ltd. is engaged in the business of manufacturing of car locks and nut bolts. Car Locks: Typically, a contract is entered into for sale of car locks and consideration is received in the event of delivery of goods to the customer place. The cost of each car lock is 1,500 and the selling price is 1,800. The terms of the contract entitles the customer to return any unused car locks within 30 days and receive a full refund. The Company estimates that the costs of recovering the car lock will be immaterial and expects that the returned car locks can be resold at a profit. The Company has sold a total of 20,000 car locks during the month ended 31st March, 2022. From past experience, Card Ltd. expects that 4% of the car locks will be returned in the financial year 2022 - 2023. Nut Bolts: On 1st April, 2021, Card Ltd. enters into a one year contract with a customer to deliver nut bolts. The contract stipulates that the price per piece will be adjusted retrospectively once the customer reaches certain sales volume, defined, as follows: Cumulative sales volume 1 - 50,000 50,001 1,00,000 1,00,001 & above Price per piece 200 190 180 Volume is determined based on sales during the financial year. There are no minimum purchase requirements. Card Ltd. estimates that the total sales volume for the year will be 90,000 based on its experience with similar contracts and forecasted sales to the customer. Card Ltd. sells 24,000 pieces to the customer during the first quarter of the financial year 2021-2022 for a contract price of 200 per piece. You are required to: (i) Analyze the terms of the revenue contracts with customers for sale of car locks as per Ind AS 115. Determine the amount of revenue, refund liability and the asset to be recognized by Card Ltd. for the said contracts of car locks. (ii) Determine the transaction price, revenue and liability, if any, for nut bolts as per Ind AS 115 at the end of first quarter of the financial year 2021-2022. (8 Marks) (a) PK Ltd. has a net worth of 450 crore. It manufactures bathroom accessories. The sales of the company are affected due to low demand. The company has provided following information: Particulars Net Profit Sales (Turnover) Amount (in crore) for year ended 31.3.2021 31.3.2020 31.3.2022 3.50 600.00 7.75 850.00 4.25 700.00 31.3.2019 4.00 710.00 During the financial year 2021-2022, PK Ltd. decided that on sale of certain selected items of bathroom accessories @ 0.50 paisa per unit sold will be contributed to the 'Save Water Foundation' which will qualify as a Corporate Social Responsibility (CSR) expense as per Schedule VII to the Companies Act, 2013. Consequently, by the year end, the Company recognized, 1,50,000 as CSR expenditure. However, only 50% of the aforesaid amount was paid to the Foundation by the end of the year ending 31st March, 2022. Discuss: (i) Whether PK Ltd. has an obligation to form a CSR committee as the applicability criteria is not satisfied in the financial year 2021-2022? The net worth has always remained below the applicability threshold. (ii) Whether 1,50,000 will qualify as CSR expenditure under section 135 of the Companies Act, 2013? (6 Marks) (b) ANANDAM Ltd. enters into a contract with a customer on 1st April, 2019 for sale of a machine and spare parts. The manufacturing lead time for the machine and spare parts is 3 years. On completion of manufacturing, ANANDAM Ltd. demonstrates that the machine and spare parts meet the agreed-upon specifications in the contract. The promises to transfer the machine and spare parts are distinct and result in two performance obligations each of which will be satisfied at a point in time. On 31st March, 2022, the customer pays for the machine and spare parts, but only takes the physical possession of the machine. Although the customer inspects and accepts the spare parts, the customer requests that the spare parts be stored at ANANDAM Ltd.'s warehouse because of its close proximity to the customer's factory. The customer has legal title to the spare parts and the parts can be identified as belonging to the customer. ANANDAM Ltd. stores the spare parts in a separate section of its warehouse and the parts are ready for immediate shipment at the customer's request. ANANDAM Ltd. expects to hold the spare parts for one to three years and does not have the authority to use the spare parts or direct them to another customer. Determine how the revenue will be recognized by ANANDAM Ltd. for the different performance obligations as per Ind AS 115? (6 Marks) (c) Card Ltd. is engaged in the business of manufacturing of car locks and nut bolts. Car Locks: Typically, a contract is entered into for sale of car locks and consideration is received in the event of delivery of goods to the customer place. The cost of each car lock is 1,500 and the selling price is 1,800. The terms of the contract entitles the customer to return any unused car locks within 30 days and receive a full refund. The Company estimates that the costs of recovering the car lock will be immaterial and expects that the returned car locks can be resold at a profit. The Company has sold a total of 20,000 car locks during the month ended 31st March, 2022. From past experience, Card Ltd. expects that 4% of the car locks will be returned in the financial year 2022 - 2023. Nut Bolts: On 1st April, 2021, Card Ltd. enters into a one year contract with a customer to deliver nut bolts. The contract stipulates that the price per piece will be adjusted retrospectively once the customer reaches certain sales volume, defined, as follows: Cumulative sales volume 1 - 50,000 50,001 1,00,000 1,00,001 & above Price per piece 200 190 180 Volume is determined based on sales during the financial year. There are no minimum purchase requirements. Card Ltd. estimates that the total sales volume for the year will be 90,000 based on its experience with similar contracts and forecasted sales to the customer. Card Ltd. sells 24,000 pieces to the customer during the first quarter of the financial year 2021-2022 for a contract price of 200 per piece. You are required to: (i) Analyze the terms of the revenue contracts with customers for sale of car locks as per Ind AS 115. Determine the amount of revenue, refund liability and the asset to be recognized by Card Ltd. for the said contracts of car locks. (ii) Determine the transaction price, revenue and liability, if any, for nut bolts as per Ind AS 115 at the end of first quarter of the financial year 2021-2022. (8 Marks)

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