5_Agriculture Theory of Accounts

Examples of biological assets, agricultural produce, and products that are the result of processing
after harvest:

Products that are the

result of processing after
Agricultural produce harvest
Biological assets
Wool Yarn, carpet
Sheep
Trees in a timber
plantation Felled trees Logs, lumber

Dairy cattle Milk Cheese

Pigs Carcass Sausages, cured hams

Cotton plants Harvested cotton Thread, clothing

Sugarcane Harvested cane Sugar

Tobacco plants Picked leaves Cured tobacco

Tea bushes Picked leaves Tea

Grape vines Picked grapes Wine

Fruit trees Picked fruit Processed fruit

Oil palms Picked fruit Palm oil

Rubber trees Harvested latex Rubber products

Some plants, for example, tea bushes, grape vines, oil palms and rubber trees, usually
meet the definition of a bearer plant and are within the scope of IAS 16. However, the
produce growing on bearer plants, for example, tea leaves, grapes, oil palm fruit and
latex, is within the scope of IAS 41.

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

2. Agricultural activity includes all of the following, except

a. Raising livestock c. Floriculture and aquaculture, including
fishing
b. Annual perennial cropping d. Ocean fishing
5_Agriculture Theory of Accounts

3. All of the following must be satisfied before a biological asset can be recognized, except
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 or cost of the asset can be measured reliably.

4. Biological assets are measured at

a. Cost c. Net realizable value
b. Lower of cost and net realizable value d. Fair value less cost of disposal

5. Cost of disposal include all of the following, except

a. Commissions to brokers and dealers c. Transfer taxes and duties
b. Levies by regulatory agencies d. Transport costs

6. Where the fair value cannot be determined reliably, the biological asset shall be measured at
a. Cost
b. Cost less accumulated depreciation.
c. Cost less accumulated depreciation and accumulated impairment losses.
d. Net realizable value.

7. Where there is a production cycle of more than one year for a biological asset, separate disclosure
is encouraged for
a. Physical change only c. Total change in value
b. Price change only d. Physical change and price change

8. Which of the following statements 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 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 of these statements are true regarding agricultural produce.

9. When agricultural produce is harvested, the harvest should be accounted for as inventory. For this
purpose, the cost at the date of harvest is deemed to be the
a. Fair value less cost of disposal at the point of harvest
b. Historical cost of the harvest
c. Historical cost less impairment
d. Market value

10. Bearer plants, such as grape vines, rubber trees and oil palms which are used solely to grow
produce over several periods should be accounted for as
a. Biological assets with disclosure c. Property, plant and equipment
b. Biological assets without disclosure d. Noncurrent investment

Practice questions:

1. A bearer biological asset

A. Livestock for meat production C. Livestock held for sale
B. Trees grown for lumber D. Fruit trees
5_Agriculture Theory of Accounts

2. Biological assets are measured at

A. FV less cost to sell C. Historical cost less accumulated impairment
losses
B. Historical cost of the harvest D. Market value

3. Not an agricultural produce

A. Bushes B. Logs C. Carcass D. Picked fruits

4. Measured at fair value less cost to sell at the point of harvest

A. Leaves B. Bushes C. Lumber D. Wine

5. Measured at the lower of cost and net realizable value

A. Sugar B. Wool C. Fruit trees D. Dairy cattle

6. When agricultural produce is harvested, the harvest shall be accounted for by using PAS 2,
Inventories, or another applicable PFRS. For the purpose of that standard, cost at the date of harvest
is deemed to be
A. Historical cost of the harvest
B. Historical cost less accumulated impairment losses
C. Market value
D. FV less cost to sell at the point of harvest

7. Subsequent to point of harvest, an agricultural produce is measured at

A. Historical cost of the harvest
B. Historical cost less accumulated impairment losses
C. Lower of cost and net realizable value
D. FV less cost to sell

8. Not costs to sell biological assets

A. Commissions to brokers and dealers
B. Levies by regulatory agencies
C. Transfer taxes and duties
D. Transport and other costs necessary to get the assets to a market

9. Where there is a production cycle of more than one year for a biological asset, PAS 41 encourages
separate disclosure of
A. Physical change only C. Total change in value
B. Price change only D. Physical change and price change

10. Regarding the choice of measurement basis used for measuring biological assets, PAS 41
A. Sets out several ways of measuring fair value C. Recommends the use of current cost
B. Recommends the use of historical cost D. Recommends the use of present value

11. A required disclosure for biological assets

I. Aggregate gain or loss arising during the current period on initial recognition of biological assets
and agricultural produce and from the change in fair value less costs to sell of biological assets
II. Description of each group of biological assets
A. I only B. II only C. Both I and II D. Neither I nor II

12. Not a common feature of agricultural activity, per PAS 41

5_Agriculture Theory of Accounts

A. Capability to change C. Measurement of change

B. Management of change D. Control of change

13. Inventories are measured at

A. Higher of cost and net realizable value C. Lower of cost and net realizable value
B. Fair value less costs to sell D. Net realizable value

14. Measurement of inventories at the lower of cost and net realizable value is done
A. On an item by item basis C. On a first-in, first-out basis
B. On an aggregate basis D. On an arbitrary basis

15. Net realizable value is

A. Estimated selling price less estimated costs to complete less estimated costs to sell
B. Replacement cost less estimated costs to complete less estimated costs to sell
C. Estimated selling price less estimated costs to complete less estimated costs to sell less normal
profit margin
D. Replacement cost less estimated costs to complete less estimated costs to sell less normal
profit margin

16. Commodities of broker-traders are normally measured at

A. Higher of cost and net realizable value C. Lower of cost and net realizable value
B. Fair value less costs to sell D. Net realizable value

17. Harvested agricultural crops or extracted mineral ores assured to be sold under a forward contract or
government guarantee are measured at
A. Higher of cost and net realizable value C. Lower of cost and net realizable value
B. Fair value less costs to sell D. Net realizable value

18. The original cost of an inventory item is below both replacement cost and net realizable value. The
net realizable value less normal profit margin is below the original cost. Per PAS 2, the inventory item
should be valued at
A. Replacement cost C. Net realizable value less normal profit margin
B. Net realizable value D. Original cost

19. Which of the following is not dealt with by PAS 41?

A. The accounting for biological assets
B. The initial measurement of agricultural produce harvested from the entity’s biological assets
C. The processing of agricultural produce after harvesting
D. The accounting treatment of government grants received in respect of biological assets

20. Where there is a long aging or maturation process after harvest, the accounting for such products
should be dealt with by
A. PAS 41 B. PAS 2 C. PAS 16 D. PAS 40
21. Where the fair value of the biological asset cannot be determined reliably, the biological asset should
be measured at
A. Cost
B. Cost less accumulated depreciation
C. Cost less accumulated depreciation and accumulated impairment losses
D. Net realizable value
Answers: DAACA DCDDA CDDAA CCDCB C