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An investor holds compulsorily convertible preference shares (CCPS) in an investee. The CCPS do NOT presently give access to the returns associated with ownership interests. Identify the correct accounting under Ind AS 28.
ATreat the CCPS as goodwill
BAccount for under Ind AS 28 only on conversion
CAccount for the CCPS under Ind AS 109 (FVTPL or FVOCI); do not include in equity method
DApply equity method to the CCPS
Answer & Solution
Correct answer: C. Account for the CCPS under Ind AS 109 (FVTPL or FVOCI); do not include in equity method
Potential voting rights inform the SIGNIFICANT-INFLUENCE assessment, but the equity method itself is applied based on EXISTING ownership interest. Instruments carrying potential voting rights that don't currently confer ownership returns are accounted under Ind AS 109. (Conversely, where such instruments give present access to returns, equity method may apply.)
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