Biological Assets

What influences the fair value for a biological asset

o Its expected replacement price
o The costs related to its while it is owned
o Its expected selling price, which is supply and demand driven
What are unrealized gains on biological assets
o The change in fair value of the biological assets from one reporting period to the next
Why are fair values used for biological assets instead of historical costs
o Biological assets grow, thus their value changes over time as a result of their growth and
change in price
Why is using fair value when measuring biological assets controversial
o It can create unrealistic expectations amongst the users of the financial reports
o It allows for a range of fair value measurements to be used, which makes it difficult for
comparisons to be made and possibly also impacts its core understanding

Liability

What is a Liability
o A present obligation of the entity arising from past events, the settlement of which is
expected to result in an outflow from the entity of resources embodying economic benefits
Contingent liability
o They are not entered into the accounts and only disclosed as notes to the accounts
o An obligation that will occur in the future only if some particular event occurs
What is equity
o Owners Equity is a residual interest in the assets of an entity after deducting its liabilities
Leasing

Finance lease
o The lease has the right of purchase at the end of the lease
o The lessee has control of the leased asset and is effectively financing the acquisition of the
asset via the leased agreement
Operating lease
o Its purpose is to obtain the use of the asset for a short period of time
o Not to gain ownership or long-term use