Page 9 - 7. COMPILER QB - INDAS 2

Sales value (a x b) 3,00,000 2,00,000
Ratio of allocation 3 2
Joint cost of Rs. 3,20,000 allocated in the
ratio of 3:2 (c) 1,92,000 1,28,000
Cost per unit [c/a] 38.4 32

(4) Determination of value of closing stock of MP1 and MP2
Particulars MP I MP 2
Closing stock in units 250 units 100 units
Cost per unit 38.4 32
Value of closing stock 9,600 3,200

Q7 (April. 19)

On 5th April, 20X2, fire damaged a consignment of inventory at one of the Jupiter‖s Ltd.‖s warehouse. This
inventory had been manufactured prior to 31st March 20X2 costing Rs. 8 lakhs. The net realisable value of
the inventory prior to the damage was estimated at Rs. 9.60 lakhs. Because of the damage caused to the
consignment of inventory, the company was required to spend an additional amount of Rs. 2 lakhs on repairing

and re-packaging of the inventory. The inventory was sold on 15th May, 20X2 for proceeds of Rs. 9 lakhs.
The accountant of Jupiter Ltd. treats this event as an adjusting event and adjusts this event of causing the
damage to the inventory in its financial statement and accordingly re-measures the inventories as follows: Rs.

Lakhs
Cost 8.00
Net realisable value (9.6 -2) 7.60

Inventories (lower of cost and net realisable value) 7.60
Analyse whether the above accounting treatment made by the accountant in regard to the financial year
ending on 31.0.20X2 is in compliance with the Ind AS. If not, advise the correct treatment along with working

for the same.
SOLUTION

The above treatment needs to be examined in the light of the provisions given in Ind AS 10 ―Events after the
Reporting Period‖ and Ind AS 2 ―Inventories‖.

Ind AS 10 ―Events after the Reporting Period‖ defines “Events after the reporting period are those events,
favourable and unfavourable, that occur between the end of the reporting period and the date when the
financial statements are approved by the Board of Directors in case of a company, and, by the corresponding
approving authority in case of any other entity for issue. Two types of events can be identified:

(a) those that provide evidence of conditions that existed at the end of the reporting period (adjusting events
after the reporting period); and
(b) those that are indicative of conditions that arose after the reporting period (non-adjusting events after
the reporting period).
Further, Ind AS 10 states that:
“An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events

after the reporting period”.
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