Atharv Sankliya (1356 Points)
18 March 2023
Neha
(ENTREPRENEUR)
(200 Points)
Replied 20 March 2023
Hens held in a poultry farm for the purpose of selling eggs would typically be considered as inventory.
CA Rakesh Ishi
(Working at Private Company)
(8532 Points)
Replied 20 March 2023
In accordance with the Indian Accounting Standard (Ind AS) 2 - Inventories, hens in a poultry farm held as an intention for selling of eggs should be classified as inventory.
The standard defines inventories as assets that are held for sale in the ordinary course of business, in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process or in rendering of services. Since hens in a poultry farm are being held for sale of eggs, they fall under the definition of inventory.
On the other hand, Property, Plant, and Equipment (PPE) are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. If hens are not intended to be sold but are instead used for breeding or to produce eggs that are processed and sold as finished products, they may be classified as PPE.
It is important to note that the classification of hens as inventory or PPE depends on the intention for which they are held. Therefore, careful consideration should be given to the facts and circumstances of each individual case.
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