TFA

Chapter 29- Biological Assets

QUESTION 29-1

Define biological assets, agricultural produce and harvest

ANSWER 29-1
Biological assets are living animals and living plants.
Agricultural produce is the harvested product of the entity’s biological assets.
Harvest is the detachment of produce from a biological asset or the cessation of a biological
asset’s life processes.
QUESTION 29-2

Give examples of biological assets, agricultural produce and products that are the result of
processing after harvest.

ANSWER 29-2
Biological asset Agricultural Produce Product after harvest
1. Sheep Wool Yarn, carpet
2. Trees in plantation forest Felled trees Logs, lumber
3. Sugar cane plant Harvested cane Sugar
4. Tobacco plant Picked Leaves Cured tobacco
5. Dairy cattle Milk Cheese
6. Pigs Carcass Sausage, cured ham

The measurement of biological assets and agricultural produce is covered by PAS-41 and the
measurement of products after harvest is covered by PAS 2 on inventories
Hazel T. Hidalgo

QUESTION 29-3

Define agricultural activity.

ANSWER 29-3

Agricultural activity or simply agriculture is 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.

Biological transformation comprises the processed of growth, degeneration, production and

procreation that cause qualitative or quantitative changes in a biological asset.

Agricultural activity covers a diverse range of activities such as the following:

1. Raising Livestock

2. Annual or perennial cropping

3. Cultivating orchards and plantations

4. Floriculture

5. Aquaculture, including fish farming

QUESTION 29-4
What are the conditions for the recognition of a biological asset or agricultural produce?

ANSWER 29-4

The entity shall recognize a biological asset or an agricultural produce when:

1. The entity controls the asset as a result of past event.

2. It is probable that future economic benefits associated with the asset will flow to the entity.

3. The fair value or cost of the asset can be measured reliably.

QUESTION 29-5
Explain the measurement of biological asset.

ANSWER 29-5

A biological asset shall be measured on initial recognition and at the end of each reporting period
at fair value less cost of disposal.
QUESTION 29-6
Explain the measurement and presentation of agricultural produce.

ANSWER 29-6

a. Agricultural produce as it grows

Agricultural produce growing on bearer plant is measured at fair value lost cost of disposal with
changes recognized in profit or loss as the produce grows.

The agricultural produce growing on bearer plant remains within the scope of IAS 41.

In other words, agricultural produce is measured at the end of each reporting period prior to
harvest at fair value less cost of disposal.

IAS 41 further provides that agricultural produce growing on bearer plant shall be classified and
presented as biological asset.

b. Harvested produce

Harvested produce is measured at fair value less cost of disposal at the point of harvest.

The harvested product becomes an inventory and shall be measured subsequently at the lower of
cost and net realizable value.

The harvested product is recorded by debiting inventory and crediting gain from change in fair
value.
QUESTION 29-7
Explain the fair value measurement of biological asset.

ANSWER 29-7

There is a presumption that fair value can be measured reliably for a biological asset.

However, this presumption can be rebutted only on initial recognition for a biological asset for
which market-determined prices are not available or estimates of fair value are determined to be
clearly unreliable.

In such a case, the biological asset shall be measured at cost less accumulated depreciation and
any accumulated impairment loss.

However, once the fair value of such biological asset becomes clearly measurable, the entity
shall measure the biological asset at fair value less cost of disposal.
QUESTION 29-8
Explain the fair value measurement of agricultural produce.

ANSWER 29-8

In all cases, an entity shall measure agricultural produce at the point of harvest at fair value less
cost of disposal.

The prevailing view is that the fair value of agricultural produce at the point of harvest can
always be measured reliably.

The fair value measurement of agricultural produce stops at the time of harvest. After that date,
PAS 2 on inventory shall apply.
Cyrus Christopher A. Isana

QUESTION 29-9

Define a bearer plant.

ANSWER 29-9

a. A bearer plant is a living plant that:

b. Is used in the production or supply of agricultural produce.
c. Is expected to bear produce for more than one period
Has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.
QUESTION 29-10

Explain the accounting treatment for a bearer plant.

ANSWER 29-10

Bearer plants are originally considered biological assets included within the scope of IAS 41 and
measured at fair value less cost of disposal.

The IASB decided that bearer plants should now be accounted for in the same way as property,
plant and equipment in IAS 16 because the operation of bearer plants is similar to that of
manufacturing.

Bearer plants are used solely to grow agricultural produce over several periods.

At the end of the productive life, the bearer plants are usually scrapped.

A bearer plant that no longer bears produce is commonly cut down and sold as scrap at the end
of the productive life.
QUESTION 29-11

Give examples of bearer plants.

ANSWER 29-11

Typical examples of bearer plants are:

a. Trees that produce fruits are bearer plants while the fruits growing on the trees are
agricultural produce until harvested.

In an oil palm plantation, a coconut tree is the bearer plant and the fruit is the agricultural
produce.

When immature, the coconut fruit can be harvested for drinking, known as “buko” juice
in the vernacular.

When mature, the coconut fruit can be processed to give oil, charcoal from the hard shell
and copra from the dried coconut flesh.

b. In a vineyard, the grape vines are the bearer plants and the grapes are the agricultural
produce.

The following should not be considered bearer plants:

a. Trees grown to be harvested and sold as log or lumber are not bearer plants.

b. Annual crops which do not bear produce for more than one period and are held solely to
be harvested as agricultural produce such as corn and rice are not bearer plants.
QUESTION 29-12

Explain the accounting treatment of a plant with dual use.

ANSWER 29-12

A plant with dual use is reported as biological asset and not as bearer plant.

A plant may have a dual use, namely:

a. The plant is cultivated for bearing agricultural produce.

b. The plant itself is being sold either as a living plant or an agricultural produce.

For example, rubber trees may be cultivated to grow rubber milk as agricultural produce and at
the same time, may be sold as living plant or cut down at the end of the productive life to be sold
as lumber or wood.

In this case, the rubber trees are recognized as biological asset because of the dual use.

However, the rubber trees are recognized as bearer plants when simply cut down and sold for
scrap upon maturity.
Shara H. Laya

QUESTION 29-13

Explain the treatment of bearer animals.

ANSWER 29-13
Bearer animals, like bearer plants, may be hold solely for the produce that they bear.
However, bearer animals will continue to be accounted for under IAS 41 in accordance with
IASB pronouncement.
In other words, bearer animals shall be reported as biological assets.
QUESTION 29-14

Explain the treatment of animal-related recreational activities.

ANSWER 29-14
Managing recreational activities, for example, game parks and zoos, is not agricultural activity.
The reason is that there is no management of the transformation of the biological asset but
simply control of the number of animals.
The natural breeding that takes place is not a managed activity and is incidental only to the main
activity of providing a recreational facility.
Animals related to recreational activities shall be accounted for in accordance with PAS 16,
Property, plant and Equipment.
QUESTION 29-15 Multiple Choice (PAS 41)

1. Biological assets
a. Are found in Biotech entities.
b. Are living animals or living plants and must disclosed as a separate line item in
the statement of financial position.
c. Must be measured at cost.
d. Do not generally have future economic benefit.

2. Which statement is true about biological asset?

a. Biological assets are measured at fair value less cost of disposal.
b. When fair value cannot be determined reliably, the biological asset shall be measured
at cost less accumulated depreciation and impairment loss.
c. There is a presumption that the fair value of biological asset can be measured reliably.
d. All of these statements are true about biological assets.

3. It is 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 asset.
a. Agricultural activity
b. Biological activity
c. Economic activity
d. Development activity

4. Biological transformation results from asset changes through all of the following except
a. Growth
b. Degeneration
c. Procreation
d. Production of agricultural produce

5. Agricultural activity results in which of the following type of asset?

a. Biological asset
b. Agricultural produce
c. Biological asset and agricultural produce
d. Neither Biological asset or agricultural produce

6. Agricultural activity includes all of the following, except

a. Raising livestock
b. Perennial cropping
c. Aquaculture
d. Ocean fishing

7. Agricultural produce is
a. The harvested product from biological asset.
b. Measured at the time of harvest at the cost of production.
c. Measured at each reporting period at fair value.
 d. All of the choices are correct.

8. Agricultural produce as it grows on bearer plant is measured at year-end prior to harvest

at
a. Fair value
b. Fair value less cost of disposal
c. Fair value plus cost of disposal
d. Fair value less cost of disposal at the point of harvest.

9. Agricultural produce harvested is measured at

a. Fair value
b. Fair value less cost of disposal at the point of harvest.
c. Cost less cost of disposal
d. Fair value plus cost of disposal at the point of harvest.
10. The harvested agricultural produce is
a. Accounted for as inventory.
b. Initially recognized at fair value less cost of disposal at the point of harvest.
c. Recorded as gain from change in fair value.
d. All of these are correct about the harvested agricultural produce.
Raina Marie G. Mangubat

QUESTION 29-16 Multiple choice (IFRS)

1. A bearer plant is a living plant that

a. Is used in the production or supply of agricultural produce
b. Is used to bear produce more for more than one period
c. Has a remote likelihood of being sold as agricultural produce, except for incidental
scrap sales.
d. Must process all these characteristics

2. All of the following can be considered bearer plant, except

a. Coconut tree
b. Grape vine
c. Rubber tree
d. Tree in the forest plantation to be harvested and sold as log or lumber

3. A living plant with dual use is classified as

a. Bearer plant
b. Biological asset
c. Investment property
d. Inventory

4. Which statement is true in relation to bearer plant?

a. The bearer plant and the related agricultural produce are accounted as two separate
assets.
b. The bearer plant is a noncurrent asset.
c. The agricultural produce is usually presented as current asset unless it takes more
than one year to mature.
d. All of these statements are true about bearer plant.

5. According to IASB, bearer plants are accounted for as

a. Biological assets with disclosure
b. Biological assets without disclosure
c. Property, plant and equipment
d. Noncurrent investment

6. Mature bearer plant is measured using

a. Cost model
b. Revaluation model
c. Either cost model or revaluation model
d. Either cost model or fair value model

7. According to IASB, bearer animals are accounted for as

 a. Biological assets
b. Property, plant and equipment
c. Investment property
d. Agricultural produce

8. Animals related to recreational activities are classified as

a. Biological asset
b. Property, plant and equipment
c. Investment property
d. Intangible asset

9. Regarding the choice of measurement basis used for biological assets, IFRS
a. Sets out several ways of measuring fair value
b. Recommends the use of historical cost
c. Recommends the use of current cost
d. Recommends the use of present value

10. Where the fair value of the biological asset cannot be determined reliably, the biological
asset is measure at
a. Cost
b. Cost less accumulated depreciation
c. Cost less accumulated depreciation and accumulated impairment loss
d. Net realizable value
QUESTION 29-17 Multiple choice (IFRS)

1. Generally speaking, biological assets relating to agricultural activity shall be measured

using
a. Historical cost
b. Historical cost less depreciation less impairment
c. A fair value approach
d. Net realizable value

2. Which of the following is unlikely to be used in fair value measurement of biological

asset?
a. Quoted market place
b. The most recent market transaction price
c. The present value of the expected net cash flows
d. External independent valuation

3. An entity had a plantation forest that is likely to be harvested and sold in 30 years. The
income shall be accounted for in which of the following?
a. No income shall be reported annually until first harvest and sale in 30 years.
b. Income shall be measured annually and reported using a fair value approach
that recognizes and measures biological growth.
c. The eventual sale proceeds shall be estimated and recognized over 30-year period.
d. The plantation forest shall be valued every 5 years and the increase in value shall be
recognized as component of other comprehensive income.

4. Which statement is true regarding agricultural produce?

a. In all cases, an entity shall measure agricultural produce at fair value less cost of
disposal at the point of harvest.
b. The prevailing view is that the fair value of agricultural produce at the point of
harvest can always be measured reliably.
c. The fair value measurement of agricultural produce stops at the time of harvest.
d. All these statements are true regarding agricultural produce.

5. Which of the following information shall be disclosed in relation to biological asset and
agricultural produce?
a. Separate disclosure of the gain or loss relating to the biological asset and agricultural
produce.
b. The aggregate gain or loss arising on the initial recognition of biological asset
and agricultural produce and from the change in fair value less cost of disposal
of biological asset
c. The total gain or loss from biological asset, agricultural produce, and from changes in
fair value less cost of disposal of biological asset.
d. There is no requirement in the standard to disclose separately any gain or loss.

6. A gain or loss arising on the initial recognition of a biological asset and from a change in
the fair value less cost of disposal of a biological asset shall be included in
 a. The profit or loss for the period
b. Other comprehensive income
c. A revaluation reserve
d. Retained earnings

7. Where there is a long aging or maturation process after the harvest, the accounting for
such products shall be dealt with by
a. PAS 41, Agriculture
b. PAS 2, Inventories
c. PAS 16, Property, plant and equipment
d. PAS 40, Investment property

8. When agricultural produce is harvested, the harvest shall be accounted for as inventory at
a. The fair value less cost of disposal at the point of harvest
b. The historical cost of the harvest
c. The historical cost less accumulated impairment loss
d. Fair value

9. Which of the following criteria must not be satisfied before a biological asset can be
recognized?
a. The entity controls the asset as a result of past event.
b. It is probable that future economic benefits relating to the asset will flow to the entity.
c. An active market for the asset exists.
d. The fair value can be measured reliably.

10. Land that is related to agricultural activity is measured

a. At fair value
b. In accordance with PAS 16, Property, Plant and Equipment, or PAS 40,
Investment Property
c. At fair value in combination with the biological asset.
d. At the resale value separate from the biological asset.
QUESTION 29-18 Multiple choice (IFRS)

1. All except the following would be classified as biological asset, except

a. Dairy cattle
b. Chicken
c. Egg
d. Tree

2. Which of the following would be classified as agricultural produce?

a. Lumber
b. Bush
c. Butter
d. Apple

3. All of the following are classified as agricultural produce, except

a. Sugar
b. Wool
c. Cotton
d. Milk

4. Which of the following would be classified as a product that is the result of processing
after harvest?
a. Cotton
b. Wool
c. Bananas
d. Cheese