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CA Final · Financial Reporting · Ind AS 2 Inventories

Sahyadri Foods Ltd holds 5,000 units of packaged snacks costing ₹80 each. Its estimated selling price is ₹110 per unit and it expects selling costs of ₹10 per unit. After the reporting date but before the financial statements are approved, a fire destroys the whole stock held in the warehouse. Which statement is correct under Ind AS 2 and Ind AS 10 principles?

Inventory remains at cost of ₹80 per unit, totalling ₹4,00,000, because NRV of ₹100 exceeds cost at the reporting date. The later fire is a non-adjusting event, so it is disclosed if material but does not change the year-end carrying amount.

  1. AInventory is stated at cost ₹80 at the reporting date, as NRV of ₹100 exceeds cost; the fire is a non-adjusting eventCorrect
  2. BInventory is written down to nil at the reporting date because the fire is an adjusting event
  3. CInventory is stated at NRV of ₹100 because NRV is always used when higher than cost
  4. DInventory is written down to ₹10 per unit, the selling cost

Explanation

At the reporting date NRV is 110-10 = ₹100, above cost ₹80, so inventory is carried at cost ₹80 x 5,000 = ₹4,00,000. A fire after the reporting date indicates a condition arising later, so it is non-adjusting and is disclosed if material. Option B wrongly treats it as adjusting.

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