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CA Final · Financial Reporting · Ind AS 2 Inventories

Sundaram Textiles Ltd holds the following items at the reporting date: (i) finished shirts held for sale to retailers, (ii) cotton yarn in the weaving process for such shirts, (iii) packing material and dyes to be consumed in production, and (iv) a standby generator kept for use in the factory over several years. Which of the following sets of items qualifies as inventories under Ind AS 2?

Finished shirts, yarn in the weaving process and consumable dyes and packing material are inventories because they are held for sale, in production for sale, or materials consumed in production. The standby generator is a long-lived factory asset, not held for sale or consumed in production, so it is excluded.

  1. AItems (i), (ii) and (iii) onlyCorrect
  2. BItems (i) and (iii) only
  3. CItems (i), (ii), (iii) and (iv)
  4. DItems (i) and (ii) only

Explanation

Ind AS 2 defines inventories as assets held for sale in the ordinary course of business, in the process of production for such sale, or in the form of materials or supplies to be consumed in production. Shirts, yarn in process and consumable dyes and packing material fit these limbs. The generator is used over several years and is not held for sale or consumed in production, so it is not inventory. Excluding work in process (option with i and iii only) is wrong because limb (b) covers it.

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