CFAS-19: PAS 41 BIOLOGICAL AND AGRICULTURAL ASSETS

DEFINITIONS;

BIOLOGICAL ASSETS are living animals (bearer animals) and living plants (bearer plants).

AGRICULTURAL PRODUCE the harvested product of the entity’s biological assets.

HARVEST is the detachment of produce from a biological asset or cessation of a

biological asset’s life processes.

AGRICULTURAL ACTIVITY 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 growth, degeneration, production and

procreation that causes qualitative or quantitative changes in the biological asset

1.Asset changes through:

1. Growth- increase in quantity or improvement in quality of an animal or plant

2. Degeneration- decrease or deterioration in the quality of a biological asset
3. Proceation- creation of additional living animal or plant

2.Production of agricultural produce such as latex, tea leaf, wool and milk

EXAMPLES

BIOLOGICAL ASSETS AGRICULTURAL PRODUCE PRODECT AFTER HARVEST

Sheep Wool Yarn , carpet

Trees in plantation forest Felled trees logs, lumber

Sugar cane plant Harvested cane Sugar

Tobacco plant Picked leaves Curled tobacco
Dairy cattle Milk Cheese
Pigs Carcass Sausages , cured ham

MEASUREMENT;

The measurement of biological assets and agricultural produce is covered by PAS41

and the measurement of products after harvest is covered by PAS2 on inventories.

 MEASUREMENT OF BIOLOGICAL ASSET

It can be measured on initial recognition and at the end of each reporting
period at fair value less cost disposal.
 MEASUREMENT AND PRESENTATION OF AGRICULTURAL PRODUCE

A. Agricultural produce as it grows

Agricultural produce growing on bearer plant is measured at fair value less cost
of disposal with changes recognized in profit or less as the produce grows or at the
end of each reporting period prior to harvest at fair value less cost of disposal.

B. Harvested produce

Harvested produce is measured at fair value less cost of disposal at the point of
harvest. The harvested product becomes an inventory and shall be subsequently at
the lower of cost and net realizable value. It is recorded by debiting inventory and
crediting gain from change in fair value.

C. Immature bearer plants

Measured at accumulated cost and it only ceases when the plant reach its
maturity
D. Mature bearer plants
**There is no specific guidance when bearing plants reach its maturity.
Judgment is required and entities need an accounting policy to determine
when a bearer plant reaches its maturity.*

Mature plants are measured using either the cost model or the revaluation
model

Its carrying amount is depreciated on a systematic basis over its useful life.

Its useful life is the number of years that it bears agricultural produce

 FAIR VALUE MEASUREMENT OF BIOLOGICAL ASSET

There is presumption that fair value can be measured reliably for a biological
asset. However, this presumption can be rebutted only on initial recognition for a
biological asset for which market- determined prices are not available or
estimates of fair value are determined to be clearly unreliable. The biological
asset shall be measured at cost less accumulated depreciation and any
accumulated impairment loss. However, once fair value of such biological asset
becomes clearly measurable, the entity shall measure the biological asset at fair
value less of disposal.

 FAIR VALUE MEASUREMENT OF AGRICULTURAL PRODUCE

It is shall be measured at the point of harvest at fair value less cost of disposal.
It can be always measured reliably
The measurement of agricultural produce STOPS at the time of harvest. After that
date, PAS 2 on inventory shall apply.

COA1E
  RECOGNITION OF BIOLOGICAL ASSETS AND AGRICULTURAL PRODUCE
An entity shall recognized a biological asset or agricultural produce when;
1. The entity controls asset as a result of past events.
2. It is probable that future economic benefits associated with the asset will flow
to the entity.
3. The fair value or cost of the asset can be measured reliably.

GAIN AND LOSS ON BIOLOGICAL ASSETS

A gain or loss arising from the initial recognition of a biological asset and any
subsequent changes in its recognition shall be included in profit or loss

A loss may arise on initial recognition of a biological asset because the cost of disposal
is deducted in determining fair value less cost of disposal of a biological asset.

A gain may arise on initial recognition of an asset when an animal gave birth

A gain or loss may arise on initial recognition as a result of harvesting which shall also be
included in profit or loss

An entity shall disclose the profits or losses arising on the initial recognition of biological
assets and agricultural produce and from the change in fair value less cost of disposal
of biological asset.

Prepared by: DELA CRUZ, Hechelle

EPLOY, Reynalyn
MURPHY, Jasmine

COA1E