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CA Final · Financial Reporting · Ind AS 41 Agriculture

Hill Fruits Ltd holds a biological asset measured at fair value less costs to sell. A state government offers a grant of Rs 5,00,000 that is conditional on the company continuing to farm in a notified hill region for the next three years. The company receives the cash in advance on the first day of the period. How is the grant treated under Ind AS 41?

A conditional grant is recognised in profit or loss only when its conditions are met, so the Rs 5,00,000 received in advance is a liability until then. Only an unconditional grant is recognised in profit or loss when it becomes receivable, and it is not deducted from the asset.

  1. ARecognised in profit or loss only when the conditions attaching to it are met; until then it is shown as a liabilityCorrect
  2. BRecognised in profit or loss in full when received, as the asset is at fair value
  3. CRecognised in other comprehensive income when received
  4. DDeducted from the carrying amount of the biological asset on receipt

Explanation

Ind AS 41 treats a conditional government grant related to a biological asset measured at fair value less costs to sell as income only when the conditions are met. Cash received before that is a liability. Immediate recognition would be correct only for an unconditional grant, which becomes income when it is receivable.

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