Biological Assets - Questions and Answers PDF

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Questions Define biological assets, agricultural produce and harvest. Biological assets 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 ...

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Questions 1.

Define biological assets, agricultural produce and harvest. Biological assets 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.

2.

What is an agricultural activity? Agricultural activities mean agricultural uses and practices including, but not limited to: producing, breeding, or increasing agricultural products, rotating and changing agricultural crops, and allowing land used for agricultural activities. It is the management by an entity of the biological transformation of biological assets for sale, into agricultural produce, or into additional biological assets.

3.

Explain biological transformation. Biological transformation comprises the processes of growth, degeneration, production and procreation that cause qualitative or quantitative changes in a biological asset. Biological transformation leads to various outcomes: • Asset changes: Growth: an increase in quantity or improvement in quality of an animal or plant. Degeneration: a decrease in quantity or deterioration in quality of an animal or plant. • Creation of new assets Procreation: producing separable living animals. Production: producing separable non-living animals.

4.

Explain the recognition of biological asset and agricultural produce. An entity shall recognize a biological asset or agricultural produce when: A. The entity controls the asset as result of past event. B. It is probable that economic benefits associated with the assets will flow to the entity. C. The fair value or cost of the asset can be measured reliably. In agricultural activity, control may be evidenced by, for example, legal ownership of cattle and the branding or otherwise marking of the cattle on acquisition or birth

5.

Explain the measurement of biological asset. A biological asset shall be measured on initial recognition and at the end of each reporting period at fair value less cost of disposal. If a fair value cannot be determined, then the biological asset can be measured at cost less accumulated depreciation and impairment loss.

6.

Explain the measurement of agricultural produce as it grows and once harvested. Agricultural produce harvested shall be measured at fair value less cost of disposal at the point of harvest. Agricultural produce that is harvested for trading or processing activities within integrated agricultural/agribusiness operations should be measured at fair value at the date of harvest and this amount is deemed cost for application of IAS 2 to consequential inventories.

7.

Define bearer plant. A bearer plant is a living plant that is used in the production or supply of agricultural produce. It is expected to bear produce for more than one period and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales. On other words, a bearer plant is a living plant is used solely to grow agriculture produce over the productive life. At the end of the production life bearer plant is usually scrapped. The bearer plant no longer bears produce is commonly cut down and sold as scrap at the end of the productive life. The incidental scrap sales would not prevent the plant from being a bearer plant.

8.

Explain the treatment of bearer plants. A bearer plant is a living plant that: • Is used in the production or supply agricultural produce; • Is expected to bear produce for more than one period; and • Has a remote likelihood of being sold. It is accounted for using the cost model or the revaluation model.

9.

Explain the treatment of bearer animals. Bearer animals, like bearer plants, may be held solely for the produce that they bear. However, bearer animals have been explicitly excluded from the amendments and will continue to be accounted for under IAS 41 on the basis that the measurement model would become more complex if applied to such assets.

10. Explain the treatment of animal-related recreational activities. Managing recreational activities, for 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 recreation facility. Accordingly, animals related to recreational activities shall be accounted for in accordance with PAS 16, Property, plant and equipment....