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Under Ind AS 28, interest on a long-term loan to an associate that is in substance part of the net investment is accrued:
ANet of any equity-method adjustments to the loan's carrying amount
BOnly when actually received in cash
CRecognised in OCI
DAt the effective interest rate applied to the original amortised cost basis — Ind AS 28 adjustments to the loan's carrying value are ignored for interest accrual
Answer & Solution
Correct answer: D. At the effective interest rate applied to the original amortised cost basis — Ind AS 28 adjustments to the loan's carrying value are ignored for interest accrual
The Ind AS 28 adjustment is a 'sponge' mechanic to absorb associate losses on long-term interests; it does not change the loan's economic substance. Interest accrues on the underlying loan terms (e.g. ₹30,000 per year at 10% on ₹3,00,000) regardless of the Ind AS 28 carrying-amount adjustment.
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