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CA Final · Financial Reporting · Ind AS 41 Agriculture

Himalaya Orchards Ltd receives a government grant of ₹10,00,000 related to its biological assets measured at fair value less costs to sell. The grant is conditional: the company must not engage in any other agricultural activity for the next 5 years. At the reporting date, 2 years have passed and the condition is being met, but the 5 years are not complete. How should the grant be recognised under Ind AS 41?

The grant should be recognised in profit or loss only when its attached conditions are met. Since the five-year no-other-agriculture condition is not yet complete, nothing is recognised now. An unconditional grant would be recognised when receivable; neither immediate recognition nor spreading is correct here.

  1. ARecognise the full grant in profit or loss immediately on receipt
  2. BRecognise the grant in profit or loss over the 5 years in equal instalments
  3. CRecognise the grant in profit or loss only when the conditions attaching to it are met, so nothing is recognised nowCorrect
  4. DRecognise the grant directly in equity as a capital reserve

Explanation

For a government grant related to a biological asset measured at fair value less costs to sell, a conditional grant is recognised in profit or loss only when the conditions attaching to it are met. An unconditional grant would be recognised when it becomes receivable. Spreading over time or crediting equity is not the Ind AS 41 treatment for such a grant.

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