Skip to content

CA Final · Financial Reporting · Ind AS 2 Inventories

Himalaya Agro Ltd grows tea bushes and harvests green leaf, which it then processes into packaged tea in its factory for sale. Which statement correctly describes the application of Ind AS 2 Inventories to the entity's holdings?

Ind AS 2 excludes living biological assets such as tea bushes and agricultural produce at the point of harvest, which are covered by Ind AS 41. Packaged tea made from the processed leaf and held for sale is inventory and falls within Ind AS 2.

  1. AInd AS 2 applies to the tea bushes while they are growing, as they are living plants held for eventual sale
  2. BInd AS 2 applies to the green leaf at the point of harvest because it is agricultural produce held for sale
  3. CInd AS 2 does not apply to the living tea bushes or to the green leaf at the point of harvest, but applies to the packaged tea being processed and held for saleCorrect
  4. DInd AS 2 does not apply to any item held by the entity, since all of them arise from agricultural activity

Explanation

Under the scope paragraph, Ind AS 2 excludes biological assets related to agricultural activity and agricultural produce at the point of harvest, which fall under Ind AS 41. Once the leaf is processed into packaged tea held for sale, it is an inventory item under Ind AS 2. Applying Ind AS 2 to the harvested leaf at the harvest point is wrong because that is expressly excluded.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 2 Inventories shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 2 InventoriesFree diagnostic mock

More Ind AS 2 Inventories questions