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CA Final · Financial Reporting · Ind AS 41 Agriculture

Mehta Agro Ltd harvests 500 tonnes of sugarcane from its fields. The carrying amount of the growing cane immediately before harvest was ₹13,00,000 (fair value less costs to sell). At the point of harvest, the fair value is ₹3,000 per tonne and the estimated costs to sell are ₹100 per tonne. After harvest, the company incurs ₹2,00,000 of processing cost before the cane is held as inventory for sale. What is the cost of the inventory under Ind AS 2 after processing, and what gain arises on harvest?

Inventory is ₹16,50,000 and the harvest gain is ₹1,50,000. Harvested produce is initially measured at fair value less costs to sell, ₹14,50,000, which becomes its Ind AS 2 cost. The gain is ₹14,50,000 less ₹13,00,000, and post-harvest processing of ₹2,00,000 is then added to cost.

  1. AInventory ₹16,50,000; gain on harvest ₹1,50,000Correct
  2. BInventory ₹17,00,000; gain on harvest ₹2,00,000
  3. CInventory ₹15,00,000; gain on harvest ₹2,00,000
  4. DInventory ₹16,50,000; gain on harvest ₹3,50,000

Explanation

Produce is measured at harvest at fair value less costs to sell: 500 × (3,000 − 100) = ₹14,50,000, which is the cost for Ind AS 2. Gain on harvest = 14,50,000 − 13,00,000 = ₹1,50,000 in profit or loss. Adding processing of ₹2,00,000 gives inventory of ₹16,50,000. Using gross fair value of ₹15,00,000 plus processing would give ₹17,00,000, which ignores costs to sell.

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