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CA Final · Financial Reporting · Ind AS 41 Agriculture

Assam Leaf Ltd harvests tea leaves from its plantation. At the point of harvest the fair value of the leaves is Rs 12,00,000 and the estimated costs to sell are Rs 1,50,000. The cost actually incurred in growing the leaves was Rs 9,00,000. At what amount is the harvested produce recognised as inventory under Ind AS 2 on the date of harvest?

The tea leaves are recognised at Rs 10,50,000. Ind AS 41 measures harvested produce at fair value less costs to sell at the point of harvest, which is Rs 12,00,000 minus Rs 1,50,000. That amount becomes the cost of inventory under Ind AS 2.

  1. ARs 10,50,000Correct
  2. BRs 12,00,000
  3. CRs 9,00,000
  4. DRs 13,50,000

Explanation

Agricultural produce is measured at fair value less costs to sell at the point of harvest: 12,00,000 − 1,50,000 = Rs 10,50,000. This amount is the cost for applying Ind AS 2. Rs 12,00,000 ignores costs to sell, and Rs 9,00,000 wrongly uses the historical cost of growing.

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