Present value of expected future cash flows to be generated by the asset. This definition does not shed any light on what exactly “costs to sell” includes – it simply indicates that determining what the necessary and unavoidable costs to enable disposal of the asset are, remains a matter of professional judgment. This subjective nature, along with the wide variety of specimen (breeds), classes and conditions of biological assets, the determination of fair value can become quite a daunting task (Tan & Geat, 2013). Bearer biological assets either bear other biological assets (e.g, livestock) or agricultural products (e.g., fruits obtained from fruit trees). By way of an example, the concepts of the measurement of biological assets can be illustrated as follows: Example: Livestock farmer, Mr X, is in the business of raising sheep, slaughtering the sheep and selling the slaughtered sheep to the butchery. Biological assets are stated at revalued amount, which is the fair value at date of revaluation less any accumulated impairment losses. IAS 41 Agriculture regulates the accounting treatment for biological assets, except for bearer plants, and for agricultural produce at the point of harvest. On the Same date, 4 animals were born. Within the requirements of IFRS for SMEs, in the determination of fair value less costs to sell, various calculations requires judgment – all pointing to the fact that the consideration of what exactly is “fair” will depend on the perception of the individual making the determination. Nature of Biological assets: Biological assets are held and can be accounted only by the business owners. ii Dedications ‘An application guideline for the fair value accounting … [(R1 805 * 500 sheep) – R600 000] Examples of biological assets Living plant – annual crops such as rice, maize, wheat Living animal – pigs, poultry, horses, cattle Produce growing on a plant that is yet to … Save my name, email, and website in this browser for the next time I comment. Indexterms- accounting estimates, biological assets, International Accounting Standards, fair value, Croatia. IFRS for SMEs, Section 34 “Specialised Activities”, paragraph 34.4, specifies the measurement of biological assets as follows: “An entity shall measure a biological asset on initial recognition and at each reporting date at its fair value less cost to sell. There are however key factors, such as the independence and competence of the expert valuators (not to mention the significant costs involved), that needs to be taken into account in order to ensure that the valuation of biological assets is conducted in a manner that will ensure financial statements reflecting reliable (and fair) values. It is true that the general rule in IAS 41 Agriculture is to measure all biological assets at fair value less costs to sell. Biological transformation – comprises the processes of growth, degeneration, production and procreation that cause qualitative or quantitative changes in a biological asset. This is however not an obstacle that cannot be overcome, seeing as there are a number of experts in the fair value valuation field that can be contracted to assist with the fair value determination. Costs may be allocated as either joint products or by-products depending on the estimated relative values of … Examples of biological assets include goats, fish, vegetables, corn, tomatoes, apples and so on. Recognition of the increase in fair value. ‘Biological asset is a living animal or plant’ - AASB 141 Para 5 Included:trees held as part of a forestry operationanimals held as part of a livestock operationorchards and vineyardsaquaculture and fishery holdings Definition of biological assets used in AASB 141 more restrictive than definition of SGARAs used inAASB 1037. This site uses Akismet to reduce spam. From paragraph 34.6 a “fair value pecking order” can be  identified as follows: If fair value cannot be determined reliably without undue cost or effort: Regardless of the appropriate fair value determination, market data should, as far as possible, form the basis of the fair value calculation, but due to the fact that circumstances in which fair values should be determined vary greatly in substance from one instance to the next, the calculation of fair value is more often than not a challenging task. Control may be through ownership or through another type of legal arrangement. Examples are livestock from which milk is produced, grape vines, fruit trees, and trees from which firewood is harvested while the tree remains. A practical guide to accoutning for agricultural assets, s.l. PwC, 2009. I suggest you key in the key words “biological assets” in the google custom search bar located towards the top left hand side of my website to get more samples. Based on IAS 41, a biological asset is a living animal or plant controlled by the entity as a result of past events. IAS Plants that undergo physical transformation and are cultivated for the purpose of sale must be treated as biological assets for accounting purposes, as defined under International Accounting Standard 41 – Agriculture (“IAS 41”). “Biological assets” is one of the categories of assets. Biological assets include plants such as … 10 animals were sold at December 31, 2013, aged 3 years old, at fair value. “Costs to sell” is not specifically defined in IFRS for SME, rather the entire phrase “Fair value less costs to sell” is defined in the glossary to IFRS for SMEs as follows: “The amount obtainable from the sale of an asset or cash-generating unit in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.”. This research project is co-authored with two lovely colleagues and friends Ahmed Sellami and Alaa Eddine INTRODUCTION One of the most important qualitative characteristics of financial information are reliability and relevance, which can sometimes be in conflict. Here, IFRS makes a distinction between bearer plants and bearer animals: Bearer plants fall within the scope of IAS 16; but; Bearer animals fall within the scope of IAS 41. For example, livestock such as goats, cows, sheep, pigs, and fish are all considered biological assets. Wilmar International Limited – Annual report – 31 December 2019 Industry: agriculture 2. The solution to the fair value determination conundrum might seem simple enough: obtain the services of an experienced professional. Biological assets include plants and animals. I’ve explained it above – guard dogs, fish caught in the ocean, etc. This paper discusses IAS 41 Agriculture with specific focus on accounting for bearer biological assets in Malaysia. Five animals, aged 2.5 years old, were purchased on July 1, 2013. However, the positive association between the cost of debt and fair value is driven by firms that transform bearer plants, i.e., living plants that ultimately bear produce for more than one year. The study adopted ex-post facto research design. IAS 41 also does not apply to the products after harvest. & Geat, K. W., 2013. town of Akhaltsikhe. Unless the fair value cannot be measured reliably, the biological assets shall be measured at cost. P/L: Profit or loss Given the guidance in IFRS for SMEs as stated above, it should be clear that the biggest challenge with regards to the measurement of biological assets lies in the degree of subjectivity involved in the determination of the fair value and the costs to sell. As part of agricultural enterprises in Latvia, it can be concluded that their number is noteworthy Table... 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