Practice: Module I

Measurement of change. The change in quality or quantity is measured and monitored as a routine management function.

Ocean fishing fails the second. The fish are capable of change and the catch can be measured, but nobody enhances or stabilises the conditions in which the shoal grows. Paragraph 6 gives ocean fishing and deforestation as its own two examples of harvesting from unmanaged sources.

Question 2 (15 marks, practical)

Neelgiri Estates Limited applies Ind AS and closes on 31 March 2027. All values below are fair value less costs to sell.

At 1 April 2026 it held 900 sheep carried at Rs. 6,300 each. On 8 July 2026 it bought 150 sheep at a market price of Rs. 6,500 each, on which costs to sell would be 4 per cent. On 14 December 2026 120 lambs were born, worth Rs. 2,400 each on that date. On 3 March 2027 it sold 80 sheep for Rs. 5,44,000 net of selling costs; they were carried at Rs. 6,300 each. At 31 March 2027 sheep were worth Rs. 6,850 each and lambs Rs. 2,700 each. During the year 4,200 kilograms of wool were shorn, worth Rs. 210 a kilogram at the point of shearing; 600 kilograms were unsold at the year end.

Prepare the reconciliation required by paragraph 50 and state the aggregate gain required by paragraph 40.

Answer to 2

Purchases enter at fair value less costs to sell, not at the market price. Rs. 6,500 less 4 per cent is Rs. 6,240, so 150 sheep enter at Rs. 9,36,000 against Rs. 9,75,000 paid, and Rs. 39,000 is a loss on initial recognition under paragraph 27.

The paragraph 40 aggregate.

The profit on the sale of the 80 sheep, Rs. 5,44,000 less Rs. 5,04,000, is Rs. 40,000. It is not part of the paragraph 40 figure, because it is a disposal profit and not a gain on initial recognition or a change in fair value.

The 600 kilograms of wool on hand are inventory under Ind AS 2 at Rs. 1,26,000, being the paragraph 13 measurement carried forward as cost. Decreases due to harvest are nil, because shearing a sheep does not reduce the sheep.

Question 3 (15 marks: 5 + 5 + 5)

(a) [5] "A bearer plant is a key definition of Ind AS 41 but is not accounted for under it." Explain, with the paragraphs.

(b) [5] Vasant Farms Limited has held a plantation of a rare timber species at cost since 2024, the fair value never having been reliably measurable. In the year ended 31 March 2027 an active market develops and fair value less costs to sell becomes measurable at Rs. 46,00,000 against a carrying amount of Rs. 31,00,000. In the year ended 31 March 2029 the market disappears again. State the treatment in each year.

(c) [5] Distinguish between an unconditional and a conditional government grant under Ind AS 41, and state the treatment of a grant of Rs. 12,00,000 received on 1 April 2026 which requires the company to farm a notified block for four years, one quarter being retained for each completed year.

Answer to 3(a)

Paragraph 5 defines a bearer plant as a living plant that is used in the production or supply of agricultural produce, is expected to bear produce for more than one period, and has a remote likelihood of being sold as agricultural produce except for incidental scrap sales. All three conditions must hold, and paragraph 5A names three cases that fail them: plants harvested as produce, dual-purpose plants, and annual crops. Paragraph 5B saves the incidental scrap sale.

But paragraph 2(b) excludes bearer plants from Ind AS 41 and sends them to Ind AS 16, so the bush or the palm is depreciated like an item of plant and machinery. Paragraph 5C then brings the produce back in: produce growing on bearer plants is a biological asset, measured at fair value less costs to sell.

The definition is therefore in the standard so that a reader can identify which plants leave it. The bush is Ind AS 16. The leaf is Ind AS 41.

Answer to 3(b)

To 31 March 2026. The presumption in paragraph 30 was rebutted on initial recognition, so the plantation is carried at cost less accumulated depreciation and impairment. Paragraph 54 requires a description, an explanation of why fair value cannot be measured reliably, the range within which it is highly likely to lie if that can be given, the depreciation method, the useful life or rate, and the gross carrying amount and accumulated depreciation at both ends of the period.

Year ended 31 March 2027. Fair value has become reliably measurable, so paragraph 30 requires the company to measure the plantation at fair value less costs to sell. The gain of Rs. 15,00,000 goes to profit or loss under paragraph 26. Paragraph 56 requires disclosure of a description of the assets, an explanation of why fair value has become reliably measurable, and the effect of the change.

Year ended 31 March 2029. The company may not revert to cost. Paragraph 31 permits the presumption to be rebutted only on initial recognition, and an entity that has previously measured an asset at fair value less costs to sell continues to do so until disposal. It must estimate fair value by a valuation technique under Ind AS 113.

Answer to 3(c)

An unconditional grant is recognised in profit or loss when, and only when, it becomes receivable, under paragraph 34. A conditional grant is recognised when, and only when, the conditions attaching to it are met, under paragraph 35, and paragraph 35 expressly treats a grant requiring the entity not to engage in specified agricultural activity as conditional.

The grant here is conditional, and the terms allow part to be retained as time passes, which is the second limb of paragraph 36.

Had the terms required the whole grant to be returned if the company left early, nothing would go to profit or loss until 31 March 2030 and the whole Rs. 12,00,000 would be a liability until then. Paragraph 57 requires the unfulfilled conditions to be disclosed in either case.