CHAPTER

BLUE NOTES
8 S
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Definition of Terms
Biological assets are living plants and animals. (PAS 41)
Agricultural produce is harvested product of the entity’s biological assets.
Harvest is the detachment of produce from a biological asset or the cessation of a biological asset’s life process.
Agricultural activity or agriculture is the management by an entity of the biological transformation and harvest of
biological assets for sale or for conversion into agricultural produce or into additional biological assets.
Biological transformation comprises the process of growth, degeneration, production and procreation that cause
qualitative changes in a biological asset.

Measurements
Biological Assets
Agricultural Produce
Initial Measurement Subsequent Measurement
Fair value less costs to sell Fair value less costs to sell
Fair value less costs to sell at PAS 2 (Inventories) applies for
the point of harvest agricultural produce after point
of harvest

Cost to Sell:
 commissions to brokers and dealers
 levies by regulatory agencies
 commodity exchanges
 transfer taxes and duties
 transport costs
 finance cost
 income taxes

Note: When reasonable assurance exists that fair value can NOT be reliably measured, biological assets are measured at cost less
accumulated depreciation and any accumulated impairment loss.

Gain or Loss from Fair Value Measurement of Biological Asset and Agricultural Produce
a. Gain or loss arising from initial recognition of a biological asset at fair value less costs to sell and any
subsequent changes in fair value costs to sell shall be included in profit or loss.
b. A loss may arise on initial recognition of a biological asset because costs to sell are deducted in determining
fair value costs to sell of a biological asset.
c. A gain may arise on initial recognition of a biological asset. (e.g. when a calf is born)
d. A gain or loss arising from initial recognition of agricultural produce at fair value less costs to sell shall be
included in profit or loss.
e. A gain or loss may arise on initial recognition of agricultural produce as a result of harvesting.

Governmnent Grant Related to Biological Asset

a. An unconditional government grant related to a biological asset that has been measured at fair value less cost
to sell shall be recognized in profit or loss when the grant becomes receivable.

Practical Accounting 1 Theory of Accounts

Chapter 8 – Biological Assets USL Blue Notes 33

b. If a government grant related to a biological asset measured at fair value less cost to sell is conditional, the
grant shall be recognized in profit or loss only when the conditions attaching to the grant are met.
c. If a government grant relates to a biological asset measured at cost less any accumulated depreciation and any
accumulated impairment losses, PAS 20 on “government grant” is applied.

Theory of Accounts Practical Accounting 1