CA Final · Financial Reporting · Ind AS 41 Agriculture
Punjab Agro Ltd owns land with a standing wheat crop that is a biological asset. No separate market price exists for the crop. The combined fair value of the land and the standing crop is ₹90 lakh, and the fair value of the bare land is ₹60 lakh. The costs to sell the crop are estimated at ₹1 lakh. At what amount is the biological asset carried?
The crop is carried at ₹29 lakh. Its fair value is derived from the combined package of land and crop less the bare land value, which is ₹90 lakh minus ₹60 lakh, giving ₹30 lakh. Deducting costs to sell of ₹1 lakh gives ₹29 lakh.
- A₹30 lakh
- B₹90 lakh
- C₹31 lakh
- D₹29 lakhCorrect
Explanation
Fair value of the crop can be derived by deducting the bare land value from the combined value: 90 − 60 = ₹30 lakh. Costs to sell are then deducted: 30 − 1 = ₹29 lakh. ₹30 lakh is wrong because it omits the costs to sell.
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