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Under Ind AS 109, a TRADE PAYABLE for purchase of goods on 45-day credit, with 18% p.a. interest applicable only after the credit period, is classified by the buyer as:
ADesignated at fair value to eliminate accounting mismatch with inventories
BAmortised cost — the fair value at initial recognition is the agreed purchase price (transaction price = fair value); interest accrues only if payment is delayed
CFair value through profit or loss — variable interest features require FVTPL
DOutside Ind AS 109 — trade payables are statutory in nature
Answer & Solution
Correct answer: B. Amortised cost — the fair value at initial recognition is the agreed purchase price (transaction price = fair value); interest accrues only if payment is delayed
Normal trade creditors are AMORTISED COST liabilities. Initial recognition = FV at transaction (the agreed price, since the credit period is normal). If payment is on time, no further interest. If delayed, the 18% accrues using EIR. FVTPL applies only to held-for-trading liabilities or specific designations. The 45-day-credit feature doesn't disqualify amortised-cost treatment.
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