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CA Final · Financial Reporting · Ind AS 2 Inventories

Ganga Pharma Ltd has 2,000 units of a drug in stock at cost of Rs 150 per unit. Estimated selling price is Rs 190 per unit and estimated selling costs are Rs 50 per unit. The drug is a finished good held for sale, not covered by any firm sales contract. How should the inventory be measured and what is the write-down?

Inventory is measured at the lower of cost and net realisable value. NRV is Rs 190 less Rs 50 selling cost, equal to Rs 140 per unit, below cost of Rs 150, so the write-down is Rs 10 x 2,000 units, which is Rs 20,000.

  1. AAt net realisable value Rs 140 per unit; write-down Rs 20,000Correct
  2. BAt cost Rs 150 per unit; no write-down
  3. CAt net realisable value Rs 190 per unit; gain of Rs 80,000
  4. DAt net realisable value Rs 140 per unit; write-down Rs 10,000

Explanation

Ind AS 2 measures inventories at lower of cost and net realisable value. NRV = 190 - 50 = Rs 140 per unit, which is below cost of Rs 150. Write-down = 10 x 2,000 = Rs 20,000. Option D uses 10 per unit on only 1,000 units, a wrong quantity, and option A in text is the right one.

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