CA Final · Financial Reporting · Ind AS 41 Agriculture
Kaveri Agro Ltd has biological assets measured at fair value less costs to sell. For the year ended 31 March it has two government grants. Grant A of Rs 2,00,000 is unconditional and became receivable on 15 March, though cash arrives in April. Grant B of Rs 5,00,000 was received in advance, but it requires the company to continue farming in a notified area for three years, and only a few months have elapsed. What amount of grant income is recognised in profit or loss for the year?
Rs 2,00,000 is recognised. An unconditional grant on a fair-valued biological asset is income when it becomes receivable, regardless of when cash arrives. A conditional grant is recognised only when its conditions are met, so the advance received for Grant B remains a liability for now.
- ARs 0, because cash for Grant A was not received in the year
- BRs 5,00,000, because Grant B was actually received
- CRs 2,00,000, because Grant A became receivable and Grant B's conditions are not yet metCorrect
- DRs 7,00,000, because both grants relate to the biological assets
Explanation
An unconditional government grant related to a biological asset measured at fair value less costs to sell is recognised in profit or loss when it becomes receivable, so Grant A gives Rs 2,00,000. A conditional grant is recognised in profit or loss only when the attached conditions are met. Grant B's conditions are not met, so the Rs 5,00,000 is not income and stays as a liability. Receipt of cash does not decide the timing.
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