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CA Final · Financial Reporting · Ind AS 41 Agriculture

Gokul Dairy Farm milked its cows and obtained 5,000 litres of milk at the point of harvest. The market price is ₹60 per litre, and the cost of transporting the milk to the market is ₹4 per litre. Considering the initial recognition of the milk and its treatment afterwards, what is the cost at which the milk is carried as inventory under Ind AS 2?

The milk is carried at ₹2,80,000. At harvest, agricultural produce is measured at fair value less costs to sell, which is (₹60 − ₹4) × 5,000 litres. The resulting gain goes to profit or loss, and this amount becomes the cost of inventory under Ind AS 2.

  1. A₹3,00,000
  2. B₹2,80,000Correct
  3. C₹2,60,000
  4. D₹20,000

Explanation

Agricultural produce is measured at harvest at fair value less costs to sell: (60 − 4) × 5,000 = ₹2,80,000. The gain is recognised in profit or loss. That amount becomes the cost for Ind AS 2. Using ₹3,00,000 ignores the costs to sell and is wrong.

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