CA FINAL FR IndAS 33 Doubt(Corrected)

CA FINAL FR IndAS 33 Illustrtion 14(https://resource.cdn.icai.org/87838bos-280825-final-ch8-u2.pdf) :


My doubt: Should'nt we be adding back ₹1,20,000 then reduce ₹27,338 for BEPS profit?
as per IndAS109(FI), we should deduct finance cost at 9% in PL? the 6% interest will just go from bank. here it says in the question that they deducted the 6% interest. should'nt we be correcting  it to get the correct profit?

Is it so that they wont do that adjustment because this is an illustration in IndAS33 EPS. Does that mean this question will not appear in the exams?

Question: An entity issues 2,000 convertible bonds at the beginning of Year 1. The bonds have a three-yearterm and are issued at par with a face value of 1,000 per bond, giving total proceeds of2,000,000. Interest is payable annually in arrears at a nominal annual interest rate of 6 percent. Each bond is convertible at any time up to maturity into 250 ordinary shares. The entity hasan option to settle the principal amount of the convertible bonds in ordinary shares or in cash.When the bonds are issued, the prevailing market interest rate for similar debt without aconversion option is 9 per cent. At the issue date, the market price of one ordinary share is 3.Income tax is ignored. Entity has accounted for the convertible instrument using the principles ofFinancial Instruments.Interest @ 6% for the year has already been adjusted in the profit attributable to shareholders.Calculate basic and diluted EPS whenProfit attributable to ordinary equity holdersof the parent entity Year 11,000,000Ordinary shares outstanding 1,200,000Convertible bonds outstanding 2,000 solution:
Assumption: Entity intends to settle only interest in cash
Allocation of proceeds of the bond issue:
Liability component (Refer Note 1) ` 303,755
+Equity component ` 1,696,245
= 2,000,000
The liability and equity components would be determined in accordance with Ind AS 32. These
amounts are recognised as the initial carrying amounts of the liability and equity components. The
amount assigned to the issuer conversion option equity element is an addition to equity and is not
adjusted.
Basic earnings per share Year 1:
1,000,000/1,200,000
= 0.83 per ordinary share
Diluted earnings per share Year 1:
It is presumed that the issuer will settle the contract by the issue of ordinary shares. The dilutive
effect is therefore calculated in accordance with the Standard.
(`1,000,000 + `27,338)/
(1,200,000 + 500,000)
= ` 0.60 per ordinary share
Notes:
1. This represents the present value of the interest discounted at 9% – ` 120,000 payable
annually in arrears for three years. ` 2,000,000 assumed to be settled in equity since option
is with the entity will not form part of liability.
2. Profit is adjusted for the accretion of ` 27,338 (`303,755 x 9%) of the liability because of the passage
of time.
3. 500,000 ordinary shares = 250 ordinary shares x 2,000 convertible bonds. Please open this link from ICAI for a better view at question: https://resource.cdn.icai.org/87838bos-280825-final-ch8-u2.pdf