Page 9 - 8. COMPILER QB - INDAS 41

Inventory:
Milk WN 5 96,000
Working Notes:

1. Land: The purchase of the land is not covered by Ind AS 41. The relevant standard which would apply
to this transaction is Ind AS 16. Under this standard, the land would initially be recorded at cost and
depreciated over its useful economic life, which is usually considered to be infinite. Hence, no
depreciation would be appropriate. Under Cost Model, no recognition would be made for post-acquisition
changes in the value of land.
2. Dairy Cows: Under the ‘fair value model’ laid down in Ind AS 41 the mature cows would be recognised

in the Balance Sheet at 31st March, 2021 at the fair value of 200 x Rs. 11,000 = Rs. 22,00,000.
Increase in price change 200 x (10,500 - 10,000) = 1,00,000
Increase in physical change 200 x (11,000 – 10,500) = 1,00,000
The total difference between the fair value of matured herd and its initial cost (Rs. 22,00,000 – Rs.

20,00,000 = a gain of Rs. 2,00,000) would be recognised in the profit and loss along with the
maintenance cost and breeding fee of Rs. 8,50,000 and
Rs. 4,60,000 respectively.
3. Grant: Grant relating to agricultural activity is not subject to the normal requirement of Ind AS 20.
Under Ind AS 41 such grants are credited to income as soon as they are unconditionally receivable
rather than being recognised over the useful economic life of the herd. Therefore, Rs. 10,00,000 would

be credited to income of the company.
4. Calves: They are a biological asset and the fair value model is applied. The breeding fee is charged to
income and an asset of 120 x Rs. 2,800 = Rs. 3,36,000 recognised in the Balance sheet and credited
to Profit and loss.

5. Milk: This is agricultural produce and initially recognised on the same basis as biological assets. Thus,
the milk would be valued at 3,200 x Rs. 30 = Rs. 96,000. This is regarded as ‘cost’ for the future
application of Ind AS 2 to the unsold milk.

8. 8