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CA Final · Financial Reporting · Ind AS 41 Agriculture

Kaveri Tea Estates Ltd grows tea on mature tea bushes in Assam. At the reporting date, fresh tea leaves are still growing on the bushes and have not yet been plucked. How should the company treat the tea bushes and the leaves growing on them?

The tea bushes are bearer plants accounted for under Ind AS 16 as property, plant and equipment, while the leaves still growing on them are biological assets under Ind AS 41, because the standard says produce growing on bearer plants is a biological asset. Inventory treatment applies only after plucking.

  1. AThe bushes and the growing leaves are both biological assets under Ind AS 41
  2. BThe bushes are property, plant and equipment under Ind AS 16, and the leaves growing on them are biological assets under Ind AS 41Correct
  3. CThe bushes are biological assets under Ind AS 41, and the growing leaves are inventory under Ind AS 2
  4. DThe bushes and the growing leaves are both property, plant and equipment under Ind AS 16

Explanation

Ind AS 41 states that produce growing on bearer plants is a biological asset. The bearer plant itself (the tea bush) is accounted for as property, plant and equipment under Ind AS 16. Treating the leaves as inventory is wrong because they become inventory only after harvest.

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