CHAPTER 12 BIOLOGICAL ASSETS PAS 41— Agriculture PAS At sal be plied wo azunt fr the flowing wen relate to agricultural activity: aaa! Biological assets 1 Agricultural produce © Government grant related to Wological aot [Nota that PAS 41 is arrlied tn agricultural produce at the int of harvest. Thereafter, PAS 2 on inventories ehall be snpied. AS 4 des not dal with he poceatng of aricultural produce eharvest For etapa the pressing o grapes ino win ‘covered By TAS 2. Definition of terms ‘Gell roduc isthe harvested product of an entity Harvest isthe detachment of produce from a ‘the cessation ofa bilogial asset life procesaea 545 Examples of biological assets ‘The following table provides examples of biolosical assets, agricultural produce and products that are the result of processing ater harvest, iological asset Agvicuteral Product produce after barvest 1 Step Wat Yern,camet 2. Tetinplanation fren Felldtress Lore tumber & Plant Hawestsdcane Sopa 4 Dairyeste Mik ome 5 Pas Cerne Snug, cured ham 6 Bushee Lat “Ten cared haces 1%. Veer Grepee Ly & Prattrees Picked Gut Proessed fut Agnn, the measurement of blogic asets and agricultural Drolucrincovered hy PAS 4] and tho messurementof products After harvest i over by PAS 2on inventors. ity or simply “agriculture” Agricultural ‘This is the management by an entity of the biolorial tranefoemation and harvest of bislgical acts for sale ot for ‘Severson into arinltral pode or ita adational biologie Examples of agricultural activity Agvcularalsotivity covers diverse range of sctivites such a8 the flowine 1 Raising livestock 2 Annual or perennial cropping A. Cultivating orchards and plantations 44 lorialture 5. Aquaculture, including fh farming 547Features of agricultural activity Cetin common feat of agricultural activity ate flows Capability tochange Living animals and plants are enpable of biological transformation b. Management of change ‘The agricultural activity must bo “managed” to foilitate the bological transformation by enhancing or at lea stabilizing conditions necessary for the pros to take place, for example, nutrient levels, moisture, temperature forty and light. . other neste, For example, harvesting fom "unmanaged" sources, such fs conan fishing and daferestation, is not agricultural activity. ¢. Monnsement of shaae ‘Teestansin alive qui tought shut ‘noo kins onal end arent os sone mangoes Biolorcl transformation Bolo vonermatin comprises the pres of owt, aeenron enon ad pret cnn gel ‘or quantitative changes in a biclogical asect. am 548 Biological transformation results from the following txpes of 1. Asset changes through 1. Growth ~ a inereae in quantity oF iraproveraent 1m ‘quality ofan animal o plant b. Dogentravon = decrease in quantity oF deterioration ‘in quality of am animal or plant. « Procrealion = ereation of additional living animal or plaot 2. Production of agricultural produce ave x latex, tea Teal ‘wool and ml Recognition ‘An eatity shall recognize a biological asset or agrsultural produce when a The entity control tho aset as 2 result of past events B. Ieinprobsble that future economic bonofits associated with the aoset il ow tthe entity. ce. The air valor cont ofthe act ean be measured reliably, Im agricultural activity, contro! may be evidenced Uy. for ccxample, legal ownership of cattle and the branding oF ‘there marking ofthe eatls on acquisition or bieth ‘The future benefits are normally assessed by measuring the significant physical atsibutes, Measurement [A bialogicalosset shall be messured on inital reeognition and ‘tthe end of ench reporting peri at fale value less costs of| Aisposal Agricultural produce shall be measured at fair valueless costs ‘of disposal at the point of harvest. 549“Costs of disposal” are the ineremental costs directly attributable the disposal ofan asset. Imother wor cot of disposal include costs that are necessary for a eal to eour bt thet would not otherwise arise, euch ae Commissions to brokers and dealers, levies by regulatory Seences and commodity exchanges, and transfer taxes and ates, Under the Basis fr Conchsions on PAS 41, costs of disposal specify exclude transport ets, Grance costs end income Fair value of biological asset ‘Ther isa preiumption that fei value ean be measured reliably fore ce However this presumption can be rebutted only on initia! recagniion for a biological aeet for which market determined Insuch a case the bilogcol ast! shal be meawured at ena Is ecamuloled lepreition and ony occulta inpotment However, once the fir valuo of such a biological asset beams cleat measurable the entity shal measure the biclogical act ‘Lai value ln cote of spon ir value of agricultural produce 1 all cases an entity hall meavure apie peduce at sat ‘of heres at fait value Jess costs of disposal ‘The fair ‘ale of areal produ the unt baret can so bbe measured reliably. z seenaimare ‘he Gir vale measurement of aga protu stops the pit thes Aer that dt, PAS? cal apy Tis seas thi he inventory sal Be memured atte ocr ‘cost and net ralizable value. — : Te Raat pro i red by dein ntentry cri incon nae een od tot oe aes Je ade peste rite al pe Ee penete risen eho ide iy bene ae FAD pensar heb Eebrerg ene! i" Tet nnce cies po moc tt fer ldentical ssc Beeps ae ee decree na neki cae a ae a ieee cr oe Teetinc netece aupteenter ‘and level of activity for the asset or ability. ee ee gre tea hr ora es Seok eet, agen sede 8. Level 8 imputs are unabeervabie inputs for the asst. hie 3g the lowest priority in th Eee ee chy ‘nobvervae inpute are cevally deve ent ‘sgt bes esate information fom the enti’ or data Gain and loss gin orlos arising on intial recognition ofa biological asset ‘NE Galt eS ofp ad os antacquet ome in fir vl les cots of isfosal all be included in profit or loss es may aso en itl rection ofa bishil ase becuse CRF Topol ve dedsced in datereining fir val ess ‘ite of daponal fs bological aes ‘Again nay arse on initial reeset ofa bilopeal acct, for ‘ingle, when a calfls born. nor lose may ares on initial recognition of Aginortee Melis harvesting Which shal slo be Ensen prot or loss ‘An ent shall dsclte the aesregate enin or loss arising 00 ihe inital recognitign of boleetaa assets and. ageatural produce and fom the change in fir value leas ents ef apocl EF bsloeealssets 551Agricultural land Agrclsural Ind i not deemed Noel asset The jeniblesexpoused ia PAS 1 for biological asnets ang eneultral prfuce do nat apply to agricultural land ‘The requirementsof PAS 16 which are applicable to property, Flat and equipment apply equally to agricultural land for purposes of measurement Biological assets attached to land Biological assot are often physically attached to land, fo ‘xample, tres in a plantation foret ‘There may be no separate market fr biological assets that reattached tothe land but an aetive market may exist for tke combined assets, that is forthe biological assets and land as. package Anentty may we infrmation regarding the combined assets tb determine the far value of the bilogical assets ‘For example, the fre value ofthe land may be deducted from the fair value of the combined sects t arrive at the fair value ofthe trees inthe plantation forest. Government grant ‘An unconditional government grant related to a biological asset that hasbeen measured at fir vole less cat of disposal Shall e reseed an income When the grant becomes Ita government grant elated toa biloialanset measured of {iro es cso peal conditional the rant sal be ‘evga nce ely when the odio atachig fo 1a government grant lates oa bis ‘at cost less any accu os asset measured impatience, PAS ape esa ad any actuated FAS 20 on "gremment grant” x applied sez Mlustration (0p January 12013, an entity purl gears ol fr P15,000 each for the pu forthe loa sommunity. On duly 1, 2015 the co" 2ealven asd 100 ons which 83 son of proguing sulk gave birth to “The active market promded the fur value lve cot f Espa ofthe bloga esate as follows: 4.000 Newterncalfos July realfon Deeb. 000 Nestornclfon Drowaber 3. “ 18,00 24000 Journal entries 1. To record acquisition af 100 cows at P1S,000 each oF 8 total of P800,00. ogden 50,000 a 7 1.509000 ‘Torecord the beth of 20 caves with fir value of P4000 toch or a total of 780000. Biagio aaate (intro chang in fair valoe 0000 0.000 4 ‘To record the change in fir value of the eows and calves on December 31: Boog asst 0.000 ‘Gainffom change in fi value 60000 Covanbicharenow dyeareeld (200 «P24,000) 2.400.000 Cikeawhichareave172yeaeold(20 xP 700 _ 14000 ‘etl fair ab -Dacomber 31,2018 Fos0.00 (Cetpacdonmttcegeawta(] 50000080000) 1,590,000 Changin firvaueFinancial statement presentation In the December 31, 2013 statement of financial position, the biological ansets shall be presented 28 a “separace line ea at the fair valve of P2,540,000 and classified ag noncurrent asset “The income staterien for 2013 would show gain from change {mn fie value of P1,040,000 (P80,000 on July 1 and P960,000, on December 3), Price change and physical change Separating the change in fair valve between the portion attributable to price change and the portion attributable to physical change is encouraged but not required by PAS a ‘The change in fair value of P1,040.000 can be separated into price change and physical change a flows: Fair vals of3 yeareelcow on December 31 18,000 ‘Auletoncontefaearecldcow Price change Fair valocf yar ld cow on December 31 24000 Fairvaluee3 eared aw December 1 ‘000 Physical change 3.000 Fair value ofnewbern can December 31 ‘000 Pairvale ofsewtornealfon duly 1 000 Price change 1.000 | Pir valu 1/2 yerold calf on Desembee 31 rom ae valuef newborn ean Decesber 1 S00 Physical hange 2000 Ayears old cows Pree ehanse (a00s3.000) Phyealchange (1606000) i2yeareldealves Pree hance (205 .000) Plysealchange G@0x2,000) Pigsieal change athirth (20 4000) ‘Twalchangeinfireaoe Summary Ph ehange: 4 yearealdcons 3yearaldcavee Physelehange Ayearaldows Layearldcaiee Ata ‘Ttalchange in ir vale amo00 onc 20.000 0.000 ‘31000 3.040.000Another ilustration vetty paces mk for asi 0 Feel 4 LAD ig ‘a enay produces my pa operations on Jann ora by $00 milk cows for P8,000,000, ‘The Si pec a en aie as te carocriig et nee uae egerennnaer eae SSE ane mee Journal entries 1 Te record the acquisition of milking cows: Bolalasses 000,000 Cons 3.000.000 2 To recocd the net gain from the change in fai value of biological assets: Biologic ace oqo00| ‘Gain fom change in sirvalue 00.000 (Change in fae uluedue to growth andpicechange 900,000 Deeresein nr valseductobarvest 20.000) Netguin— biological assets 0000 8 To record the gain from change in fair value agricultural produce ig ee Mkinwerny| 00000 ‘Guin fom change in yale 400000 386 QUESTIONS 1. Define Uilogial assets 2, Define agricultural produce 5. Define harvest, 4.Give examples of biological assets and a rosuen, 65, What i an agricultural activity? 6.Give examples of agricultural activity 7.What ate the common features of agricultural activity? 8. Explain biological transformation. 9.Explain the recognition of biological asset and sescaltural produce and 10,3xplain the measurement of biological asst serealeural produ 11, 3yplain the fair value of biological asset 12. Saplain the fac value of agicultucal produce. 13, What in fir value? 14 Explain the fair value hierarchy 15. Define an active market and a principal market. 16 Whats the treatment of the gain or Toss arising from the ‘mensurement of biological aset and agricultural produes? 17s ageeultural land a biological asset? 16 Explain the measurement of the biological assets phyrically attached to land. 19 Explain th recognition ofa government grant related to ‘iological noses : 387