BIOLOGICAL ASSETS

Nature
PAS 41 shall be applied to account for the following when they relate to agricultural activity.
a. Biological Assets
b. Agricultural Produce at the point of harvest
c. Government grant related to a biological asset
Biological Asset – are living animals and living 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.

Recognition
An entity recognizes a biological asset or agricultural produce only when
a. The entity controls the asset as a result of past events
b. It is probable that future economic benefits will flow to the entity.
c. The fair value or cost of the asset can be measured reliably.

Measurement
Biological assets within the scope of IAS 41 are measured on initial recognition and at
subsequent reporting dates at fair value less estimated cost to sell, unless fair value cannot be
reliably measured.
 In such case that fair value cannot be reliably measured, biological assets shall be
measured at cost less accumulated depreciation and any accumulated impairment
Agricultural produce is measured at fair value less estimated cost to sell at the point of harvest.
Because harvested produce is a marketable commodity, there is nop measurement reliability
exception for produce.
 Fair value measurement of agricultural produce stops at point of harvest.
 After such date, IAS 2 – Inventories shall apply (lower of cost and net realizable value)
All costs related to biological assets at fair value are recognized as expenses when incurred, other
than costs to purchase biological assets.
Transactions
Gain or loss on subsequent measurement
 The gain/loss on initial recognition biological assets at fair value less cost to sell and
changes in fair value less cost to sell of biological assets during a period are included in
profit or loss.
 Gain/loss on initial recognition of agricultural produce at fair value less cost to sell are
included in profit or loss for the period in which it arises.
 The change in fair value of biological assets is part physical (growth) change and part
unit price change.

Presentation
Biological assets shall be presented as a separate line item and classified as noncurrent assets.
Agricultural produce is considered bas inventories. IAS 41 applies until point of harvest and IAS
2 applies after harvest.

Disclosure
General disclosure requirements in IAS 41 include:
 Aggregate gain or loss from the initial recognition of biological assets and agricultural
produce and the change in fair value less cost to sell during the period.
o Separate and/or additional disclosures are required where biological assets are
measured at cost less accumulated depreciation.
 Description of an entity’s biological assets, by broad group
 Description of the nature of an entity’s activities with each group of biological assets and
non-financial measures or estimates of physical quantities of output during the period and
assets on hand at the end of the period.
 Information about biological assets whose title is restricted or that are pledged as
security.
 Commitments for development or acquisition of biological assets
 Financial risk management strategies
 Reconciliation of changes in the carrying amount of biological assets, showing separately
changes in value, purchases, sales, harvesting, business combinations and foreign
exchange differences
Disclosure of a quantified of each group of biological assets, distinguishing between consumable
and bearer assets or between mature and immature assets, is encouraged but not required.
If fair value cannot be measured reliably, additional required disclosures include:
 Description of the assets
  An explanation of why fair value cannot be reliably measured
 If possible, a range within which fair value is highly likely to lie
 Depreciation method
 Useful lives or depreciation rates
 Gross carrying amount and the accumulated depreciation, beginning and ending
If the fair value of the biological assets measured at their cost less any accumulated depreciation
and any accumulated impairment losses becomes reliably measurable during the current period,
an entity shall disclosed the following:
 Description of the biological assets
 An explanation of why fair value has become reliably measurable
 Effect of the change
Disclosures relating to government grants include the nature and extent of grants, unfulfilled
conditions and significant decreases expected in the level of grants.

Reference:
Valix, C.T., Peralta, J. F., Valix, C. M. (2016). Financial Accounting Volume 1