Agriculture

• Biological Asset


  A living animal or plant
• Biological Assets


  • Consumable Biological Assets
  • Bearer Biological Assets
• Consumable Biological Assets


  • Those that are to be harvested as agricultural produce or sold as biological assets
• Consumable Biological Assets


  • Livestock intended for the production of meat
  • Livestock held for sale
  • Fish on farms
  • Crops such as maize and wheat
  • Produce on a bearer plant
  • Trees being grown for lumber
• Bearer Biological Assets


  • Those that are held to bear produce, only the produce is harvested while the bearer's biological asset remains
• Bearer Biological Assets


  • Livestock from which milk is produced
  • Fruit trees from which fruit is harvested
• Bearer Plant


  A living plant that: 1) Is used in the production or supply of agricultural produce, 2) Is expected to bear produce for more than one period, and 3) Has remote likelihood of being sold as agricultural produce, except for incidental scrap sales
• Plants that are to be harvested as agricultural produce are not bearer plants
• Annual crops and similar plants that die once their produce has been harvested are considered consumable plants, and therefore classified as biological assets
• Only plants that bear produce repeatedly over a long period of time are considered bearer plants (PPE)
• Agricultural Produce


  The harvested produce of the entity's biological assets
• Harvest


  The detachment of produce from a biological asset or the cessation of a biological asset's life processes
• Agricultural produce refers to those that are in their natural state and are not yet processed. Those that are already subjected to processing are treated as inventories.
• Produce growing on bearer plants is a biological asset, but in many cases it is impractical to account for fruits growing on trees before they are harvested
• Types of Assets


  • Biological Asset (PAS 41)
  • Bearer Plants (PAS 16 PPE)
  • Agricultural Produce at Point of Harvest (PAS 41)
  • Products are the Result of Processing After Harvest (PAS 2)
• Agricultural Activity


  The 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
• Examples of Agricultural Activities

  • Raising livestock
  • Forestry
  • Annual or perennial cropping
  • Cultivating orchard and plantations
  • Floriculture
  • Aquaculture (including fish farming)
• Common Features of Agricultural Activities

  • Capability to Change - living animals and plants are capable of biological transformation
  • Management of Change - management facilitates biological transformation by enhancing, or at least stabilizing, conditions necessary for the process to take place
  • 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
• Biological Transformation


  Comprises the processes that cause qualitative and quantitative changes in biological assets: 1) Asset changes through growth, procreation, and degeneration, 2) Production of agricultural produce
• Fair Value


  The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date
• Costs to Sell


  The incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxes
• Initial measurement


  Recognized in profit or loss
• An entity uses PFRS 13 Fair Value Measurement when measuring the fair value of biological assets and agricultural produce
• Fair value measurement may be facilitated by grouping biological assets or agricultural produce according to significant attributes such as age and quality
• Contract prices are not necessarily relevant when measuring fair value
• Fair value is not adjusted by the existence of a contract
• When cost may approximate fair value

  • Little biological transformation has taken place since initial cost occurrence
  • The impact of the biological transformation on price is not expected to be material
• Cash flows for financing the assets or reestablishing biological assets after harvest are not considered when measuring fair value
• Costs to sell include

  • Commission to brokers
  • Levies by regulatory agencies and commodity exchanges
  • Transfer taxes and duties
• Costs to sell does not include transport costs, advertising costs, income taxes, and interest expense
• If location is a characteristic of the biological asset, the price in the principal (or most advantageous) market shall be adjusted for the transport costs
• Advertising costs are not incremental costs directly attributable to the sale of the biological assets of agricultural produce
• Active Market


  A market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis
• Loss from Change in FVLCS

  Recognized in profit or loss
• The other necessary costs are expensed when incurred
• The harvest cost is expensed immediately
• Subsequently, the inventory is measured at Lower of Cost or NRV under PAS 2
• Biological assets attached to land may not have a separate market but an active market may exist for the combined assets (i.e., biological assets, raw land, and land improvements) as a package
• The agricultural land is accounted for as property, plant, and equipment under PAS 16
• Only government grants that are related to biological assets measured at fair value less costs to sell are recognized in profit or loss when the conditions attached to the grant are met