BIOLOGICAL ASSETS

PAS 41: AGRICULTURE

 BIOLOGICAL ASSETS
(EXCEPT BEARER
PLANTS)

AGRICULTURAL PRODUCE
PAS 41 AT THE POINT OF
HARVEST

GOVERNMENT GRANT
RELATED TO BIOLOGICAL
ASSETS

• AGRICULTURAL PRODUCE AFTER THE

POINT OF HARVEST SHALL BE
GOVERNED BY PAS 2 INVENTORIES
• Biological assets- are "living
animals and living plants" EXCEPT
Bearer plants.

• Agricultural produce- is the

harvested product of an entity's
biological assets.

• Harvest- is the detachment of

produce from a biological asset or
the cessation of a biological
asset's life processes.
61. On January 1, 2024, Wala Company
acquired equipment for P1,000,000 with a
10-year useful life and P100,000 residual
value.
The straight line method of depreciation is
used. During 2028, after the 2027 financial
statements had been issued, the entity
determined that the remaining useful life
was only four more years and the residual
value would be P40,000.
What is the carrying amount of the
equipment on December 31, 2028?
AGRICULTURAL
This is the management by an entity of
ACTIVITY
the biological transformation and
harvest of biological assets for sale or
for conversion into agricultural produce
or into additional biological assets.
Examples of agricultural activity:
1. Raising livestock
2. Annual or perennial cropping.
3. Cultivating orchards and plantations
4. Floriculture
5. Aquaculture, including fish farming
FEATURES OF AGRICULTURAL
ACTIVITY
a. Capability to change
Living animals and plants are capable of
biological transformation.
Biological transformation results from the
following types of outcome:
1. Asset changes through:
a. Growth
b. Degeneration
c. Procreation
2. Production of agricultural produce such
as latex, tea leaf, wool and milk.
FEATURES OF AGRICULTURAL
ACTIVITY
b. Management of change
The agricultural activity must be "managed"
to facilitate the biological transformation
by enhancing or at least stabilizing
conditions necessary for the process to take
place, for example, nutrient levels,
moisture, temperature, fertility and light.
Such management distinguishes agricultural
activity from other activities.
For example, harvesting from "unmanaged"
sources, such as ocean fishing and
deforestation, is not agricultural
activity.
FEATURES OF AGRICULTURAL
ACTIVITY
c. Measurement of change
The change in quality or quantity
brought about by biological
transformation or harvest is
measured and monitored as a
routine management function.
 MEASUREMENT
INITIAL AND SUBSEQUENT RECOGNITION
OF BIOLOGICAL ASSET:
FAIR VALUE LESS COST OF DISPOSAL
This Photo by Unknown author is licensed under CC BY-SA.

INITIAL AND SUBSEQUENT RECOGNITION

OF AGRICULTURAL PRODUCE:
FAIR VALUE LESS COST OF DISPOSAL
AT THE POINT OF HARVEST

*DO NOT USE APPRAISED VALUE

 MEASUREMENT
Cost of disposal:
1. Commission paid to broker and
dealer,
This Photo by Unknown author is licensed under CC BY-SA.
2. Levies by regulatory agency
and commodity exchange, and
3. Transfer taxes and duties.
 MEASUREMENT
Cost of disposal excludes
transport cost, finance cost and
income tax.
- Transport and necessary cost to
bring the asset to the market are
not part of Cost of disposal but
This Photo by Unknown author is licensed under CC BY-SA.

are adjustment to the qoutation

price to arrive at fair value.
Qoutation price
Less: Transport and necessary cost
Fair Value
 MEASUREMENT
If the Fair value is not
determinable, the biological asset
shall be measured at "Cost less
accumulated depreciation and any
accumulated impairment".
This Photo by Unknown author is licensed under CC BY-SA.

Once the fair value of such a

biological asset becomes clearly
measurable, the entity shall
measure the biological asset at
fair value less costs of disposal.
 GAINS AND LOSSES
Agricultural land is not deemed a
biological asset. The PAS 16 PPE apply
equally to agricultural land for
purposes of measurement.
Biological assets are often physically
This Photo by Unknown author is licensed under CC BY-SA.
attached to agricultural land. If there
is no separate market for biological
assets but an active market may exist
for the combined assets(land and
biological asset).
Fair value of the land less fair value
of the combined assets = fair value of
the Biological assets in the plantation
forest.
GOVERNMENT GRANT RELATED
TO BIOLOGICAL ASSETS
- An unconditional government grant measured
at FVLCOD shall be recognized as income
when the grant becomes receivable.
- An unconditional government grant measured
at FVLCOD shall be recognized
as income only when the conditions
attaching to the grant are met.
- 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
 ANIMAL-RELATED
RECREATIONAL ACTIVITIES
- Managing recreational activities, for
example, game parks and zoos, is not
agricultural activity.
Accordingly, animals related to
recreational activities shall be
accounted for in accordance with PAS 16,
Property, plant and equipment.
 BEARER PLANTS
- Bearer plants should be accounted for in
the same way as property, plant and
equipment because their operation is
similar to manufacturing.
- However, the agricultural produce growing
on bearer plants will remain within the
scope of IFRS 41.
- At the end of their productive life, the
bearer plants are usually scrapped and it
is no longer significant in generating
future economic benefit. The only
significant future economic benefit of
bearer plants comes from the agricultural
produce created.
ILLUSTRATION
At the beginning of current year, an entity
purchased 100 cows which are 3 years old for
P15,000 each for the purpose of producing
milk for the local community. On July 1, the
cows gave birth to 20 calves. The active
market provided the FVLCOD of the biological
assets as follows:
Newborn calf on July 1
P4,000
Newborn calf on December 31
5,000
1/2 year old calf on December 31
7,000
3 years old cow on December 31
18,000
JOURNAL ENTRIES
1. To record acquisition of 100 cows at P15,000 each or a total of
P1,500,000.
Biological assets 1,500,000
Cash 1,500,000
2. To record the birth of 20 calves with a fair value of P4,000
each or a total of P80,000.
Biological assets 80,000
Gain from change in fair value 80,000
3. To record the change in fair value of the cows and calves on
December 31:
Biological assets 960,000
Gain from change in fair value 960,000
Cows which are now 4 years old (100 x P24,000)
P2,400,000
Calves which are now 1/2 year old ( 20 x P 7,000)
140,000
Total fair value - December 31
2,540,000
Carrying amount of biological assets
(1,580,000)
Change in fair value
960,000
3 years old cow on January 1 P15,000
4 years old cow on December 31 24,000

Fair value change of 100 cows 9,000 * 100 calves

= P900,000

Newborn calf on July 1 P4,000

1/2 year old calf on December 31 7,000

Fair value change of 20 calves 3,000 * 20 calves

= P60,000
Total change in fair value
P960,000
Price change and Physical change
Separating the change in fair value between the portion
attributable to price change and the portion
attributable to physical change is encouraged but not
required by PAS 41.
The change in fair value of P1,040,000 can be separated into price
change and physical change as follows:

Fair value of 3 years old cow on December 31 18,000

Acquisition cost of 3 years old cow 15,000
Price change 3,000

Fair value of 4 years old cow on December 31 24,000

Fair value of 3 years old cow December 31 18,000
Physical change 6,000

4 years old cows

Price change (100 * P3,000) P300,000
Physical change (100 * P6,000) P600,000
P900,000
The change in fair value of P1,040,000 can be separated into price
change and physical change as follows:

Fair value of newborn calf on December 31 5,000

Fair value of newborn calf on July 1 4,000
Price change 1,000

Fair value of 1/2 year old calf on December 31 7,000

Fair value of newborn calf on December 31 5,000
Physical change 2,000
½ year old calves
Price change (20 * P1,000) P20,000
Physical change (20 * P2,000) P40,000
Physical change at birth (20 * P4,000) P80,000
P140,000
Summary

Price change:
4 years old cows P300,000
1/2 year old calves 20,000 P320,000

Physical change:
4 years old cows calves P600,000
1/2 year old 40,000
At birth 80,000 P720,000
Total change in fair value P1,040,000
JOURNAL ENTRIES RELATED TO BIOLOGICAL ASSET AND AGRICULTURAL
PRODUCE
1. AGRICULTURAL PRODUCE AT THE POINT OF HARVEST
AGRICULTURAL PRODUCE XXX
GAIN ON INITIAL RECOGNITION XXX
A. IF AGRICULTURAL PRODUCE IS SOLD AT THE POINT OF HARVEST
INVENTORY XXX
AGRICULTURAL PRODUCE XXX
B. IF RECOGNIZED AS BIOLOGICAL ASSET
BIOLOGICAL ASSET XXX
AGRICULTURAL PRODUCE XXX
JOURNAL ENTRIES RELATED TO BIOLOGICAL ASSET AND AGRICULTURAL
PRODUCE
2. NEW BORN CALF
A. AGRICULTURAL PRODUCE XXX
GAIN ON INITIAL RECOGNITION XXX
BIOLOGICAL ASSET XXX
AGRICULTURAL PRODUCE XXX

B. IF RECOGNIZED IMMEDIATELY AS BIOLOGICAL ASSET

BIOLOGICAL ASSET XXX
GAIN ON RECOGNITION XXX

3. GAIN ON CHANGE IN FAIR VALUE

BIOLOGICAL ASSET / AGRICULTURAL PRODUCE XXX
GAIN FROM CHANGE IN FAIR VALUE XXX