Page 7 - 8. COMPILER QB - INDAS 41

and not Ind AS 41.

Q5 (January 2021 – 4 Marks – Also added in New ICAI Module)

On 1st November, 20X1, C Agro Ltd. purchased 100 goats of special breed from a market for Rs 10,00,000
with a transaction cost of 2%. Goats fair value decreased from Rs 10,00,000 to Rs 9,00,000 as on 31st
March, 20X2.
Determine the fair value on the date of purchase and as on financial year ended 31st March, 20X2 under

both the cases viz-
i) the transaction costs are borne by the seller and
ii) the transaction costs are incurred by the seller and purchaser both.
Also pass journal entries under both the situations on both dates.

SOLUTION

As per para 12 of Ind AS 41, a biological asset shall be measured on initial recognition and at the end of
each reporting period at its fair value less costs to sell. Therefore, regardless of who bears the transaction
costs, the transaction costs of 2% are the costs to sell the goats on 1st November 20X1, and therefore, the
goats should be measured at their fair value less costs to sell on initial recognition date, i.e., Rs 9,80,000.

Journal Entry
As on 1st November 20X1:
Where transaction costs are borne by the seller:
Biological assets (Goats) A/c Dr. 9,80,000
Loss on purchase of biological assets Dr. 20,000

(Goats) A/c
To Bank A/c 10,00,000
Where transaction costs are borne by the buyer:
Biological assets (Goats) A/c Dr. 9,80,000
Loss on purchase of biological asset (Goats) A/c Dr. 40,000

To Bank A/c 10,20,000

As on 31 March 20X2 – under both the scenarios:
Loss on fair valuation of biological assets A/c Dr. 98,000
To Biological assets (Goats) A/c 98,000
[9,80,000 - (9,00,000 - 18,000)]

Q6 (July.21 – 9 Marks)
Sewa Dairy Limited prepares financial statements on 31st March each year. On 1st April 2020 the
Company carried out the following transactions:

 Purchased a land for Rs. 60 lakhs.
 Purchased 200 dairy cows (Average age at 1st April 2020 - 2 years) for Rs. 20 lakhs. Received a non-
refundable grant of Rs. 10 lakhs towards the acquisition of the cows.
During the year ending 31st March 2021, the Company on its dairy cows incurred

8. 6