Biological Assets

PAS 41
Scope of PAS 41
• PAS 41 applies, when they relate to agricultural
activity, to biological assets, agricultural produce at
the point of harvest, and government grants related
to these biological assets. It does not apply to land
and intangible assets related to agricultural activity
• Note: Bearer plants were excluded from the scope
of PAS 41 by Agriculture: Bearer Plants
(Amendments to PAS 16 and PAS 41), which applies
to annual periods beginning on or after 1 January
2016.
Objective of PAS 41
• to establish standards of accounting for agricultural
activity- the management of the biological
transformation of biological assets (living plants and
animals) into agricultural produce(harvested product of
the enterprise's biological assets)
Definition
• Agricultural activity – the management by an entity of
the biological transformation of biological assets for
sale, into agricultural produce or into additional
biological assets.
• Biological transformation – comprises the processes of
growth, degeneration, production and procreation that
cause qualitative or quantitative changes in a biological
asset.
• Biological asset – a living animal or plant.
• Agricultural produce – the harvested product of the
entity’s biological assets
What are biological assets?
• Biological assets include the following:
1. Sheep, pigs, beef cattle, poultry and fish
2. Dairy cows
3. Trees in a forest
4. Plants for harvest (for example, wheat and vegetables)
5. Trees, plants and bushes from which agricultural produce is
harvested (for example, fruit trees, vines and tea bushes)
Recognition
An entity should recognize a biological asset or
agriculture produce when, and only when:
 the entity controls the asset as a result of past
events;
 it is probable that future economic benefits will flow
to the entity; and
 the FV or cost of the asset can be measured
reliably.
MEASUREMENT
• PAS 41 requires biological assets to be measured on initial recognition and at each
balance sheet date at their fair value less costs to sell, except in limited
circumstances.
• The gain on initial recognition of biological assets at fair value less costs to sell, and
changes in fair value less costs to sell of biological assets during a period, are
included in profit or loss. [PAS 41.26]
• Agricultural produce is measured at fair value less estimated costs to sell at the
point of harvest. [PAS 41.13]
• Because harvested produce is a marketable commodity, there is no 'measurement
reliability' exception for produce.
• A gain on initial recognition (e.g. as a result of harvesting) of agricultural produce at
fair value less costs to sell are included in profit or loss for the period in which it
arises. [PAS 41.28]
• 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
PRESENTATION AND DISCLOSURE
• aggregate gain or loss from the initial recognition of biological assets and
agricultural produce and the change in fair value less costs to sell during the
period* [IAS 41.40]
• description of an entity's biological assets, by broad group [IAS 41.41]
• description of the nature of an entity's activities with each group of biological
assets
• information about biological assets whose title is restricted or that are pledged
as security [IAS 41.49]
• commitments for development or acquisition of biological assets [IAS 41.49]
• financial risk management strategies [IAS 41.49]
• reconciliation of changes in the carrying amount of biological assets,
showing separately changes in value, purchases, sales, harvesting,
business combinations, and foreign exchange differences* [IAS 41.50]
• Separate and/or additional disclosures are required where biological
assets are measured at cost less accumulated depreciation [IAS 41.55]
• 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. [IAS 41.43]
• If fair value cannot be measured reliably, additional disclosures are
required. See [IAS 41.54]
• Disclosures relating to government grants include the nature and extent
of grants, unfulfilled conditions, and significant decreases expected in
the level of grants.
Jessie Company sold some of their biological assets to
Kendrick Company for P200,000 on July 1, 2019. The sale
was made at Jessie’s farm. However, if the biological assets
are being sold at an auction, they could have been sold at a
higher price but the company has to incur transportation
costs of P2,000. Jessie Company paid P6,000 commission in
relation to the sale. Kendrick Company incurred P3,000 as
transport cost in bringing the asset to their own farm.
Question 1: At what amount should Kendrick Company
recognize the assets initially?
A. P192,000 B. P194,000 C. P196,000 D. P200,000
Question 2: What amount of loss should Kendrick Company
recognize on initial recognition related to the asset?
A. None B. P3,000 C. P6,000 D. P9,000
The following information pertains to the biological asset and
agricultural produce of Lady Gaga Company. The fair value of the
company’s vineyard was P25,000,000. As of June 30, 2019, Lady Gaga
Company determines the following:
Fair value of the grapes harvested at March 31, 2019 P5,000,000
Estimated point-of-sale costs of the grapes 100,000
Estimated point-of-sale costs of the vines 200,000
Fair value of the vines as of March 31, 2019, prior to harvest 31,000,000
Lady Gaga Company determines that there is no change in fair value of
the vines between March 31, 2019 and June 30, 2019. What total
amount of gain should Lady Gaga Company report in its June 30, 2019
as a result of the change in the fair value of the biological asset and
agricultural produce?
A. P800,000
B. P1,000,000
C. P4,900,000
D. P5,700,000
Mariah Company is in business of deer farming. A herd of one
hundred deer is held throughout the financial year of 2019.
The only change during the year is the increase in their
physical attributes due to aging from two to three years. The
relevant data are as follows:
Fair value of a 2-year old deer at January 1, 2019 P3,000
Fair value of a 2-year old deer at December 31, 2019 3,300
Fair value of a 3-year old deer at December 31, 2019 4,800
How much is the increase in the fair value of the biological
asset due to physical change?
A. P30,000
B. P150,000
C. P180,000
D. P480,000
1. Which of the following may be classified as a biological asset?
A. breast milk B. cheese curls C. mama monkey D. dead mama monkey
2. Which of the following may be classified as an agricultural produce?
A. duck B. table egg C. egg powder D. cake
3. Which of the following is not one of the common features of agricultural
activities?
A. accounting change C. management of change
B. capability to change D. measurement of change
4. A biological asset is initially and subsequently measured at
A. fair value B. fair value less costs to sell C. cost D. fair value less costs to
complete
5. Which of the following is not a biological asset that is accounted for under
IAS 41 Agriculture?
A. animals that are being grown to be butchered for their meat
B. animals held to produce milk
C. plants grown to produce fruit over a long period of time
D. plants grown to be harvested and sold
THANK
YOU