Page 26 - 33. FR RTP NOV. 22

Total 1,25,000
Note: The cost of purchase excludes the refundable purchase taxes paid on acquisition of the goods as the Rs.

10,000 paid will be refunded to the retailer.
Ind AS 2 specifically exclude selling cost from forming part of cost of inventory. However, selling and
distribution costs are generally used as single term because both are related, as selling costs are incurred to
effect the sale and the distribution costs are incurred by the seller to complete a sale transaction by making
the goods available to the buyer from the point of sale to the point at which the buyer takes possession.
Since these costs are not related to bringing the goods to their present location and condition, the same are

not included in the cost of inventories. Accordingly, though the word ―distribution costs‖ is not specifically
mentioned in Ind AS 2, these costs would continue to be excluded from the cost of inventories. Therefore, it
excludes the selling expenses incurred (i.e., Rs. 2,000 delivery costs and Rs. 3,000 other selling costs).

(ii) Paragraph 16 of Ind AS 16, Property, Plant and Equipment, inter alia states that the cost of an item of

property, plant and equipment comprises the initial estimate of the costs of dismantling and removing the
item and restoring the site on which it is located, the obligation for which an entity incurs either when
the item is acquired or as a consequence of having used the item during a particular period for purposes
other than to produce inventories during that period.
Further, paragraph 18 of Ind AS 16 states that an entity applies Ind AS 2 to the costs of obligations for
dismantling, removing and restoring the site on which an item is located that are incurred during a particular

period as a consequence of having used the item to produce inventories during that period. The obligations for
costs accounted for in accordance with Ind AS 2 or Ind AS 16 are recognised and measured in accordance with
Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets.
Paragraph 16 of Ind AS 16 clarifies that decommissioning costs that meet the recognition criteria under Ind AS

37, Provisions, Contingent Liabilities and Contingent Assets, for a provision are added to the cost of an item
of property, plant and equipment if such costs are not incurred through the asset‖s use to produce inventories.
Paragraph 18 fills the gap by clarifying where such costs are incurred through the asset‖s use to produce
inventories, they are added to the cost of inventories.
Where the obligation to restore the asset arises due to the use of the asset to produce inventories but not due
to the asset‖s installation, construction or acquisition, the costs are added to the costs of inventories.

Based on the above provisions and discussion, cost of restoring the site Rs. 20,000 incurred during the period
of production as a consequence of having used the item to produce inventories during that period should be
added to the cost of inventories. However, later the inventories are measured at the lower of cost and net
realisable value in accordance with paragraph 9 of Ind AS 2.

Solution 17
To determine the diluted EPS of Company P, the diluted EPS of Company S has to be calculated first.

Calculation of Company S’s diluted EPS:
Company S‖s earnings for the period Rs. 30,000
Weighted average ordinary shares 10,000
Incremental shares (refer W.N.) 200
Company S‖s diluted EPS Rs. 30,000/ (10,000 + 200)

Rs. 2.94
Calculation of Company P‖s diluted EPS:

33.25