Ind AS 41 Worked From End to End

Step 3: the gain analysed

The second line proves out on its own. The 228 cows on hand at the year end have risen from Rs. 58,200 to Rs. 60,700, a rise of Rs. 2,500 each, so Rs. 5,70,000. The 30 calves have risen from Rs. 11,640 at birth to Rs. 12,500, a rise of Rs. 860 each, so Rs. 25,800. Rs. 5,70,000 and Rs. 25,800 make Rs. 5,95,800.

Bring in the loss on the purchase and the whole of what paragraphs 26 and 27 put through profit or loss is this.

The 12 cows sold are not in either figure. They were carried at Rs. 58,200 and realised Rs. 7,26,000 against a carrying amount of Rs. 6,98,400, so Rs. 27,600 is a profit on disposal, which is not a fair value movement.

Step 4: the milk

Paragraph 13 measures agricultural produce at the point of harvest at fair value less costs to sell, and paragraph 28 puts the resulting gain in profit or loss as it arises.

6,84,000 litres at Rs. 34 is Rs. 2,32,56,000, recognised as the milk is drawn.

That figure is also the cost of the milk for Ind AS 2, because paragraph 13 says so in its second sentence.

Step 5: the government grant

The grant is unconditional and relates to a herd measured at fair value less costs to sell, so paragraph 34 applies: profit or loss when, and only when, it becomes receivable. It was sanctioned on 2 March 2027, so it is receivable at the reporting date.

Rs. 6,00,000 goes to profit or loss in the year ended 31 March 2027, with a receivable of the same amount in the balance sheet. The date of receipt, 15 April 2027, is irrelevant.

Step 6: the effect on profit or loss

Nothing is capitalised. The running costs of keeping the herd are expensed as incurred. They do not increase the carrying amount of the animals, because the animals are measured at fair value less costs to sell and not at cost.

Step 7: the paragraph 50 reconciliation, as it would be printed

Two lines are worth a sentence each.

Decreases due to harvest are nil. Milking a cow does not reduce the cow. The same line on a timber plantation would carry the whole value of the trees felled.

The calves are inside the fair value line. Paragraph 50 gives no separate line for births, and the seven lines it does give are a minimum. A company may add one.

Step 8: the note in words

Biological assets comprise 228 milch cows and 30 calves, held for the production of milk and measured at fair value less costs to sell determined by reference to quoted prices in the district cattle market for animals of comparable age and yield. The aggregate gain arising during the year on initial recognition of biological assets and agricultural produce, and from the change in fair value less costs to sell of biological assets, was Rs. 2,41,29,000. Milk output for the year was 6,84,000 litres. No biological asset is pledged as security and there are no commitments for the acquisition of biological assets. An unconditional government grant of Rs. 6,00,000 was recognised in profit or loss during the year and was received after the reporting date.

The Rs. 2,41,29,000 in that note is the paragraph 40 aggregate: Rs. 8,73,000 on the biological assets and Rs. 2,32,56,000 on the milk. The grant and the profit on disposal are not part of it, which is why the note reports them separately. Milk output in litres is there because paragraph 46(b)(ii) requires the physical quantity of agricultural produce for the period.

The five things this problem tests

1. An asset bought at market price is recognised below it, because costs to sell are deducted. Paragraph 27.
2. A birth is a gain, immediately and in full. Paragraph 27.
3. Milk is measured once, at harvest, and that figure becomes its cost for Ind AS 2. Paragraph 13.
4. An unconditional grant is recognised when receivable, not when received. Paragraph 34.
5. Running costs are expensed. Nothing is added to the carrying amount of a fair-value asset.