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CA Final · Financial Reporting · Ind AS 41 Agriculture

Gokul Sugars Ltd harvested sugarcane from its fields. At the last reporting date, the standing cane was carried at ₹44,00,000, its fair value less costs to sell. At the point of harvest the cane's fair value is ₹52,00,000 and the costs to sell are ₹2,00,000. At what amount is the harvested cane initially recognised as inventory under Ind AS 2, and what gain on harvest is reported in profit or loss, taking the gain as the difference from the ₹44,00,000 carrying amount?

Inventory is initially recognised at ₹50,00,000, which is fair value of ₹52,00,000 less costs to sell of ₹2,00,000, and this becomes its cost under Ind AS 2. The gain recognised in profit or loss is ₹6,00,000, being ₹50,00,000 less the earlier carrying amount of ₹44,00,000.

  1. AInventory ₹52,00,000; gain ₹8,00,000
  2. BInventory ₹50,00,000; gain ₹6,00,000Correct
  3. CInventory ₹44,00,000; gain nil
  4. DInventory ₹50,00,000; gain ₹8,00,000

Explanation

Agricultural produce is measured at fair value less costs to sell at the point of harvest, which is 52,00,000 − 2,00,000 = 50,00,000. This amount is the cost for applying Ind AS 2. The gain is 50,00,000 − 44,00,000 = 6,00,000. Using the gross fair value of 52,00,000 ignores the costs to sell.

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