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    05a - Biological Asset PDF

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    Emmanuel
    1. PAS 41 outlines the accounting for biological assets and agricultural produce. Biological assets are living animals or plants while agricultural produce is the harvested product from biological assets. 2. Biological assets and agricultural produce should be recognized when the entity controls the asset, it is probable future benefits will flow, and the fair value can be reliably measured. They are measured at fair value less estimated point-of-sale costs. 3. Gains and losses from changes in fair value are reported in net profit or loss. Costs related to biological assets measured at fair value are recognized as expenses. Fair value is presumed reliably measurable but may be estimated using other methods.

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    05a - Biological Asset PDF

    Uploaded by

    Emmanuel
    229 views2 pages
    1. PAS 41 outlines the accounting for biological assets and agricultural produce. Biological assets are living animals or plants while agricultural produce is the harvested product from biological assets. 2. Biological assets and agricultural produce should be recognized when the entity controls the asset, it is probable future benefits will flow, and the fair value can be reliably measured. They are measured at fair value less estimated point-of-sale costs. 3. Gains and losses from changes in fair value are reported in net profit or loss. Costs related to biological assets measured at fair value are recognized as expenses. Fair value is presumed reliably measurable but may be estimated using other methods.

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    1. PAS 41 outlines the accounting for biological assets and agricultural produce. Biological assets are living animals or plants while agricultural produce is the harvested product from biological assets. 2. Biological assets and agricultural produce should be recognized when the entity controls the asset, it is probable future benefits will flow, and the fair value can be reliably measured. They are measured at fair value less estimated point-of-sale costs. 3. Gains and losses from changes in fair value are reported in net profit or loss. Costs related to biological assets measured at fair value are recognized as expenses. Fair value is presumed reliably measurable but may be estimated using other methods.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    229 views2 pages

    05a - Biological Asset PDF

    Uploaded by

    Emmanuel
    1. PAS 41 outlines the accounting for biological assets and agricultural produce. Biological assets are living animals or plants while agricultural produce is the harvested product from biological assets. 2. Biological assets and agricultural produce should be recognized when the entity controls the asset, it is probable future benefits will flow, and the fair value can be reliably measured. They are measured at fair value less estimated point-of-sale costs. 3. Gains and losses from changes in fair value are reported in net profit or loss. Costs related to biological assets measured at fair value are recognized as expenses. Fair value is presumed reliably measurable but may be estimated using other methods.

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    Financial Accounting Biological Asset G.

    Ong
    I-01 PAS 41 – Agriculture
     Definition:
     Agricultural Activities: is the management by an entity of the biological transformation of biological assets for
    sale, into agricultural produce, or into additional biological assets. Examples: Raising of livestock,
    Aquaculture (Tilapia raising).

     Biological assets: living animals and plants. Examples: Sheep, Plant, Dairy cattles, Vines, Fruit Trees, etc.

     Agricultural produce: the harvested product from biological assets. Examples: Wool, Logs, Picked Fruits such
    as apples, etc.

     Harvest: is the detachment of produce from a biological asset or the cessation of the life of a biological asset.

     Biological Transformation: comprises the processes of growth, degeneration, production, and procreation that
    cause qualitative changes in a biological asset.

     Recognition: An enterprise should recognize a biological asset or agriculture produce when, and only when:
    a. when the enterprise controls the asset as a result of part events;
    b. it is probable that future economic benefits will flow to the enterprise, and;
    c. the fair value or cost of the asset can be measured reliably.
    Note: Control can be evidenced by, for example, legal ownership of cattle and branding and marking of the cattle
    on acquisition or birth.

     Measurement: Biological assets should be measured on initial recognition and at subsequent reporting dates at
    FAIR VALUE LESS ESTIMATED POINT-OF-SALE COSTS, unless fair value cannot be reliably measured.

    Note: Point of sale costs: Commissions to brokers and dealers, levies by regulatory agencies and commodity
    exchanges, and transfer taxes. Point of sale costs DO NOT include transport and other costs necessary to get assets
    to a market.

     Agricultural produce should be measured at FAIR VALUE LESS ESTIMATED POINT-OF-SALE


    COSTS at the point of harvest.

     Gain and Losses


     A gain or loss on initial recognition of biological assets at fair value less estimated point of sale costs and
    any subsequent changes in fair value less estimated point of sale costs during a period, are reported in net
    profit or loss.
     A gain on initial recognition of agricultural produce at fair value should be included in net profit or loss
    for the period in which it arises.
     All costs related to biological assets that are measured at fair value are recognized as expenses when
    incurred, other than costs to purchase biological assets.

     Fair value of Biological asset


     There is a presumption that fair value can be reliably measured for most biological assets. However, that
    presumption can be rebutted for a biological asset that, does not have a quoted market price in an active
    market and for which other methods of reasonably estimating fair value are determined to be clearly
    inappropriate or unworkable. In such a case, the asset is measured at cost less accumulated depreciation
    and impairment losses. If fair value becomes reliably measurable, a switch to FAIR VALUE LESS
    POINT-OF-SALE COSTS is required.

     The following guidance is provided on the measurement of fair value:


     a quoted market price in an active market for a biological asset or agricultural produce is the most
    reliable basis for determining the fair value of that asset. If an active market does not exist, IAS 41
    provides guidance for choosing another measurement basis. First choice would be a market-

    Biological Asset - 1 of 2
    Financial Accounting Biological Asset G. Ong
    determined price such as the most recent market price for that type of asset, or market prices for
    similar or related assets;
     if reliable market-based prices are not available, the present value of expected net cash flows from the
    asset should be use, discounted at a current market-determined pre-tax rate;
     in limited circumstances, cost is an indicator of fair value, where little biological transformation has
    taken place or the impact of biological transformation on price is not expected to be material; and
     the fair value of a biological asset is based on current quoted market prices and is not adjusted to
    reflect the actual price in a binding sale contract that provides for delivery at a future date.

     Other Issues
     The change in fair value of biological assets is part physical change (growth, etc.) and part unit price change.
    Separate disclosure of the two components is encouraged, not required.

     Fair value measurement stops at harvest. IAS 2, Inventories, applies after harvest.

     Agricultural land is accounted for under IAS 16, Property, Plant and Equipment. However, biological assets
    that are physically attached to land are measured as biological assets separate from the land.

     Intangible assets relating to agricultural activity (for example, milk quotas) are accounted for under IAS 38,
    Intangible Assets

     Disclosure
     Disclosure requirements in IAS 41 include:
     carrying amount of biological assets.
     description of an enterprise's biological assets, by broad group.
     change in fair value during the period.
     fair value of agricultural produce harvested during the period.
     description of the nature of an enterprise's activities with each group of biological assets and non-financial
    measures or estimates of physical quantities of output during the period and assets on hand at the end of
    the period.
     information about biological assets whose title is restricted or that are pledged as security.
     commitments for development or acquisition of biological assets.
     financial risk management strategies.
     methods and assumptions for determining fair value.
     reconciliation of changes in the carrying amount of biological assets, showing separately changes in value,
    purchases, sales, harvesting, business combinations, and foreign exchange differences.

    NOTE: Disclosure of a quantified description of each group of biological assets, distinguishing between
    consumable and bearer assets or between mature and immature assets, is encouraged but not required.

     If fair value cannot be measured reliably, additional required disclosures include:


     description of the assets.
     an explanation of the circumstances.
     if possible, a range within which fair value is highly likely to fall.
     gain or loss recognized on disposal.
     depreciation method.
     useful lives or depreciation rates
     gross carrying amount and the accumulated depreciation, beginning and ending.

    NOTE: If the fair value of biological assets previously measured at cost now becomes available, certain
    additional disclosures are required.

    NOTE: Disclosures relating to government grants include the nature and extent of grants, unfulfilled
    conditions, and significant decreases in the expected level of grants.

    Biological Asset - 2 of 2

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