Skip to content

CA Final · Financial Reporting · Ind AS 2 Inventories

Himalaya Tea Estates Ltd grows tea bushes and harvests green leaf, which it then processes into packaged tea for sale. Its finance team lists: (i) tea bushes standing in the field, (ii) green leaf at the point of harvest, (iii) packaged tea held in the warehouse for sale, (iv) packing materials to be consumed in packaging. Which items are within the scope of Ind AS 2 Inventories?

Only packaged tea and packing materials fall under Ind AS 2. Standing tea bushes are biological assets and green leaf at the point of harvest is agricultural produce, both excluded from Ind AS 2 and covered by Ind AS 41. Packing materials are supplies consumed in production, so they qualify as inventories.

  1. AOnly (iii) and (iv), because standing bushes and green leaf at harvest are covered by Ind AS 41Correct
  2. BAll four items, because each is held for sale or consumption
  3. COnly (iii), because materials and supplies are never inventories
  4. DItems (ii), (iii) and (iv), because Ind AS 41 covers only living animals

Explanation

Ind AS 2 excludes biological assets related to agricultural activity and agricultural produce at the point of harvest, which fall under Ind AS 41. Packaged tea is held for sale and packing materials are supplies to be consumed in production, so both are inventories. Option C is wrong because para 6(c) includes materials and supplies. Option D is wrong because produce at harvest is also 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