(i) Mr. Raj a relative of key management persomel recived numurenation of Rs. 25 000 for his services in the company for the period To 1 st April 2018 to Jt June 2018 h 2018 The left the service. Should the relative be identical be identical partly at the closing date ie. on 31 st March 2019 for the purposes of AS- 18?
Answers
Answer:
Schedule III to the companies Act, 2013 provides that:
“A liability should be classified as current when it satisfies any of the following criteria:
(a) it is expected to be settled in the company’s normal operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is due to be settled within twelve months after the reporting date; or
(d) the company does not have an unconditional right to defer settlement of the liability
for at least twelve months after the reporting date. Terms of a liability that could, at
the option of the counterparty, result in its settlement by the issue of equity
instruments and do not affect its classification.”
In the present situation, Sagar Ltd. does not have an unconditional right to defer settlement
of the liability for at least 12 months after the reporting date, hence Sagar Ltd. should
classify the FCCBs as current liabilities as on 31st March 2018.
The position will be same even when the bond holders are expected to convert their
holdings into equity shares of Sagar Ltd. Expectations cannot be called as unconditional
rights. Thus, in this situation also, Sagar Ltd. should classify the FCCBs as current
liabilities as on 31st March 2018.
Explanation:
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