Will you classify the inventory and trade receivables of GEL as current assets? Would your answer be different if the production time is 13 months…

6 (i) Inventory and debtors need to be classified in accordance with the requirement of Ind AS 1, which provides that an asset shall be classified as current if an entity expects to realise the same or intends to sell or consume it in its normal operating cycle. In this case, time lag between the purchase of inventory and its realisation into cash is 16 months [10 months + 6 months]. Both inventory and the debtors would be classified as current if the entity expects to realise these assets in its normal operating cycle. (ii) No, the answer will be the same as the classification of debtors and inventory depends on the expectation of the entity to realise the same in the normal operating cycle. In this case, time lag between the purchase of inventory and its realisation into cash is 28 months [13 months + 15 months]. Both inventory and debtors would be classified as current if the entity expects to realise these assets in the normal operating cycle. (iii) As per para 74 of Ind AS 1, where there is a breach of a material provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date, the entity does not classify the liability as current, if the lender agreed, after the reporting period and before the approval of the financial statements for issue, not to demand payment as a consequence of the breach. In the given case, ABC Ltd. (the lender) agreed not to demand payment after the reporting date but before the financial statements were approved for issuance. Hence, the liability should be classified as non-current in the financial statement as at 31st March, 2024.