9. This is maintained in the Property!Supply Division to rec) the movements of inventories © B 4 10. This is used to report wasted materials, such a5 destroy Stock Cand (SC) Propery/Supply Card (PSO) Supplies Leiger Card (SLO) Magic Care (MC) spare parts and other spoilages. ® a Wasted Stocks Card (WSC) Waste Materials Report Report onthe Physical Count of Inventories Inventory Custodian Slip Chapter 8 Agriculture Differentiate between the following: biological assets, tural procluce and inventory. ie the intial and subsequent measurements of biological assets and agricultural produce. se means farming or the process of producing crops and livestock. In this chapter, we will len the sccounting ciples used for assets, liabilities, income and expenses g from agricultural activities. ural Activity ~ is the management by an entity of the opcal transformation and harvest of biological asses or sale, ding exchange or nor-exchange transactions, ot for ersion into agricultural produce, or into additional biological Examples of agricultural activities include: raising forestry, annual or perennial cropping, cultivating The following are the common features of agricultural ies apbility fo change ~ living animals and plants are capable of ological transformation; ation by enhancing, o at least stabilizing, conditions for the process fo take place. Such management inguishes agricultural activity from other activites. For206, ‘example, harvesting from unmanaged fishing and deforestation) isnot agricul © Measurement of change ~ the change brought about by biological transformation or harvest ‘measured and monitored as a routine management function, ‘Biological Transformation ~ comprises the following processes thi ‘cause qualitative or quantitative changesin a biological asst: 1. Asset changes through: 1. Growth ~ is an increase in quantity or improvement i quality ofan animal or plant. bb. Procreation ~is the creation of ad plants. (c Digeneration — is a decrease dleerioration in quality ofan animal or plant. I, Production of agricultural produce, Biologia! Asset ~is a iving animal or plant “Agricultural Produce ~ 18 the harvested ‘iological ssets. “Harvest” isthe detachment of produce from biological asset or the cessation of a processes, Examples: Biological assets | Agricultural produce [Tiesinn | Faled ees plantation ovest_ Plats anit sources (such as oct Chesse ural activity; and Yarn, Carpet ‘in quality or quantiy Suusages, Cured hams “Tea, Cured tobacco Wine Proceed fait biological asset or agricultural produce fs recognized when it the asset recognition criteria, incuding the reliable surement ofits fir value or cost, tional living animals rement gical ase are initially and subsequently measured at fair less costs to sel, The gain or loss arising from initial rement and subsequent changes in fair value less costs to Jane recognized in surplus or defi Biological assets whose fair value cannot be reliably ined on intial recognition are initially measured at cost subsequently measured atest es accumu depreciation and ated npairment losses. in the quantity. product of the enti biological asse’s i cultural produce is initially measured at fair value less costs to fat the point of harvest. Ths will be the deemed cost when quently measuring the agricultural produce using. the surement basis for inventories or other basis Prodhcts that ar The gain arising. from the inital measurement is result of processing in surplus or deficit, after harvest [ Tows tumiber {Costs to Sel ~ are the incremental costs directly attributable to ‘ the disposal of an asset, excluding finance costs and income | ie taxes | sugar | Comm Four, Cor Si | theca, Clothingcape Determination of Fair value 4. Fairvalue is determined as follows Contract prices are irlevant when determining fair value. Quoted price nanactvemarket xe | oe costs necessary in geting thea Leaner os 2) Me teee sock ry in geting the asset Fair eae a The determination of far val maybe facta by grouping Bicogea! ants or agricul produce accoring, » Active Market ~ is a market in which all the following ‘significant attributes, e.g,, by age or quality, 4 endtonsexsk the ee aden the markt are homogeneo3s ling buyers and sellers can normally be found 4 ty tine ond pres re avaabl 1 the pubic Cost may sometimes approximate fair value, a PP? particularly Little biological transformation has taken place since initial cos incurrence(e4, seedlings planted immediately priorto reporting date or ‘The impact of the biological transformation on price isnot ‘expected to be material (eg, the initial growth in a 30-year pine tee plantation production cycle) If here are more than one ative markets the entity shall ui the price inthe market expected tobe used > if there is no active market, the entity shall estimate th market price based on one of the following: {The most recent market transaction price, provided that there ‘no significant change in economic circumstances Detw the dae ofthat transaction and the reporting date: i. Marke? prices for siilar asols with adjustment 10 etl citferences; iil, Sector bonchnarks, such asthe value of an orchard expres per export tray, bushel or hectare, and the value of ca ‘expressed per kilogram of meat; and i, Present value of expected net cash flows from the ax Giscounted at current marketetermined rate CGrcumstances where marketdetermined prices or val fare not available for » biological asset in its prew condition, Estimates of cashflows exclude finance costs, tn and costs of reestablishing biological assets after harw (ef the cost of replanting tres in a plantation forest oi harvest) Biological assets attached to land (ej trees in a plantation forest) may not have a separate market but an active market ‘may exist for the combined assets (Le, biological assets, rawr Tand and land improvements) as a package. In such case, the fir value of the raw land and land improvements may be deducted from the fair value of the combined assets to arrive ‘atthe flr value ofthe biological asets, biological asset that is previously measure at far value less ‘costs to sell shall be measured at fair value less costs to sell luni itis disposed210 chapter Disclosures Breeding Stocks is “The following are the peculiar disclosures related to agriculture: (Cashin Bank-Local Currency, Current The aggregate gain or loss on initial recogrition of biological ‘Account ber ‘assets and agricultural produce and from the change in fi ‘Value less costs to sell of biological assets ‘Ten breeding stocks are born. The FVLCS on date of birth is £2,000 each. The journal entry isa follows: ‘Consumable and Bearer biological assets andl biological asses ‘held for sale and held for distbution at no charge or for # Brooding Stocks ap Sanne ag Gain on Initial Recognition of Biological Assets si > Consunable Biological Assets ~ are those that are to be harvested as agricultural produce or 10 be sold. o! distributed a8. iological assets, Examples: livestod {intended for production of meat, annual crops lke mei and rice, and tes being grown for lumber. ton 2: (Adapted tom GAM for NCAs Caper S12) nua 1 2, En Aas fe 2a ld tren sols ttl crying moun 25.0, following transactions occurred duting the period: (On July 1, 2031, ten breeding stocks were bom. The FVLCS on this date is 92,000 each, On July 1 201, two 2year old breeding stocks were enna eee: December 31, 20<, tree breeding stocks were born. The FFVLCS on this date is #2100 each Bearer Biblogicl Assels are those that are self generating ‘and are used repeatedly. for more than one yi Examples: dairy cattle held for the production of mi fruit trees, and trees from which firewood is harvest hile the tre remains. Mature and immature bloga assets + Matie Boga! Ass ~ are those that have atin! fy MMCFVL.CS on December 31, 20s ae a follows harvestable specications (for consumable bioloyl sw) ov are able to sustain regular harvests (or bevel biological assets). ‘pew born 2,100 03 ye. 08 2.150 2yrs old 5200 25ys.0ld 5.400 44. The amount of change in fair value les costs to sel du o Sym old 95,700 physical changes and due to price changes. lirements: Compute forthe change in FVLCS (a) due to price and (b) due to physical change, Mlustration 1: Journal entries fa, Entity A purchases five breeding stocks at £3,000 each, ei to the fair value less costs to sell (FVLCS) at the acquis date, The jousnal entry iss follows aeapts Bice aS a2 Requirement (a: Due to Price Change ‘Biological Asset is living animal or plant Agricultural Produce ~ is the harvested product ofthe entity's Biological assets. An agricultural produce subjected to post- hnarvest processing i inventory, Formula (PVICS, and Age beg.) (FVLCS, beg. Age bes) x Qty FVLGS of 2 ym | [ FVLCS of 2 ym. | [ No. of anim Bibogical asets are initially and subsequently measured at fair ‘don Dee. 3 od on a inthe rou alu less costs to sell. Gain oF loss arising frm measurement fare recognized in surplus or deficit, in EV ‘Asset Grou Agricultural produce is initially measured at fair value less rombeg.@ye:2 ym) (500 PROD x8 1000 ‘Costs to sell tthe point of harvest. Boron July Hysoyey (#2100 ®2,000) x10 100 Bra Gent pa RIE ee Purchased only 125-2) (95200-95100) x2 20 oi anspor BornonDee.31 0yr0yr) _ (®2100-#2:100) x3 I there are more than one active markets, the entity shall use (Change FVECS duo Price Change x Peipeice fiw nkxbat pected wT Requirement (0: Due to Physical Change Formule (FVIGS, end Age end) = (FVLCS, end. Age beg) » Qty. “TEVICS of newborn at date of birth EVLCS of 3 yr FVLCS of 2 vm ld on Des 31 olden Dee 31 ‘Asset Group change FIG rom beg, O27=) (05700- P5200) x5 ‘Born on july 1(03yes0yey: — ¢P215-2100) x10 Purchased on july 1 Gyre) (95400-95200) x2 Boron Dee. 31 @ye0ye) _(P2100-2,100) x3 FYLCS of new bom on uly (9200010) FYLGS of new bom on Dec. 31 (92,1003) Change in FVLCS duet Physi! Changephe Chapter 9 Investment Property Tearning Objectives 1. Define investment property and give examples. 2 State the initial and subsequent measurements of investment property. 3, Account for the impairment of investment property, and th reversal thereof ii iw. Introduction Incesiment Property ~ i land and/or building held for rentals capital appreciation. It is not held for use in the production supply of goods or services, for administrative purposes or sale the ordinary course of business. Bxamplesofinvesinet propery: Lind hed for long-emn copia appeciton athe thon i shorter salle ordinary core o operations bs Land held ora carey undermined re we fA tiuing owed by the ty (orld by he ety unr func leas) and leased out under one of ore Oper Jenson comercial bai 4A uly hats vacant ut ld to be bed out unl Ge or moe operating ees ona commer basso exer Propet thats bung construc or developed for atari ts lavetmen propery {.Sgniean poron of property tht shld toca rx for eaptal appreciation rather than o provide servis a trian pion tat ld for use in he precio supply of goods or servis for minis purposs coated Sere tt Pty 21 following are items not considered as investment property: Biological assets related to agricultural activity; Mineral rights:and! mineral reserves such a8 oll, natural gas "and similar non-regenerative resources; Property held forsale in the ordinary course of operations or Inthe process of construction or development for such sale; Property being constructed or developed on belsalf of third parties ‘Owner-occupied property, including Property held for future use as owner-occupied property; ‘Property held for future development and subsequent use as owner-occupied property; Property occupied by employees; ot ‘Owner-occupied property awaiting disposal Property thats eased to another entity under a finance lease; Property held to provide a socal service and which also generates cash inflows; Property held fr strategic purposes; and, Property held for use in the production or supply of goods or eres or for administrative purposes, [for NGAs, Chapter 9 Sec. 4) ci lal Measurement investment property is initially measured at cost. The surement of cst depends on the mode of acquisition, (Gis purchase ~ the cost of an investment property acquired through cash purchase comprises the purchase price and any direct costs necessary in bringing the asset to its intended Kondition, eg, professional fees for legal services and transfer taxes.m cooper nrg of Example Entity A purchases land to be held fo capital appreciation ft 'P1,000000, Entity A pays ”80,000 for legal services on! transfer taxes relate tothe acquisition. ‘completion of the investment property, Upan completion, the onstruction costs are redlasified to the “Investment Property” account ‘ae [investment Propery, Land ==) OBO.DOD (Cosl-Modifid Disbursement System (MDS) Regular Ta renga feimant ‘cost ofan investment property does not include the following: Siar-up cost, unless they are necessary to bring the property fo the condition necessary for it to be capable of operating in the manner intended by management; Operating losses incurred before the investment property achieves the planned level of occupancy or ‘Abnormal amounts of wasted materials, labor or other resources incurred in constructing oF developing the property. 2. Instliment purchase — the cost of an investment. proper acquired through installment purchase is the cish it equivalent The difference between this amount andl the tl payments is recognized as interest expense over the perio i credit lent Measurement properties are subsequently measured under the cost Under this model, investment properties are measured at Jess accumulated depreciation and accumulated impairment 3, Nomexchinge trmsaction ~ the cost of an investment prope acquired through a non-exchange transaction isthe fi at the acquisition date The fair value model, which is available to business oe es is not alle for goverment entities Entity A receives an unconditional donation of land witht a sfersTo or From Investment Property ‘or from investment property shall be made onl Ta Investment Property, Land “0,08 © Property iy ee eta mi Dannie ther isa change in use, as evidenced by the following inkind ‘one Commencement of owner occupation, for a transfer from “Tarai met of donate tod e iestment property to owner-occupied property; ‘of owner-occupation, fora transfer from owner-occupied sperty to investment property; cement of an operating, lease (on a commercial bass) to another party, fora transfer from inventories to investment [property of ‘Commencement of development with a view to sale, for 2 fer from investment property to inventories. 4. Selfconsructon ~ the cost of a self-constructed investing property includes the costs of direct materials labor, anf onstruction overhead, The cost of wasted materials, labor other resources incurred in constructing the property recognized as expense. ‘Construction costs incurred are initially record! the “Construction in Progress” account pending.28 Chapter 'A government entity accounts for transfers 0 oF from investment property at cost. Accordingly, mo gain or foss shull arise from the transfer, except when the transferred asset i impaired, in which case, impairment loss shal be recognized fin{ before making the reclassification Baaldings S000 ‘Accumulated Depresation~LP, Buikngs} 400000 Accumulated Impairment LLP, Bldgs. 100,000 Investment Property, Builings 2,000,000 B: From IP to inventories ky A decides to redevelop the building referred to in Case A ith the view of subsequent sale, ‘lustration 1: Transfers to Investment Property Case A: From PPE to IP nity A traasfers building with « historical cost of #2,000,00 i {investment property. At the date of transfer, the building has a ‘accumulated deprecation of (400,000 and. an accumulate impairment loses of ®100,000 “Merchandise Inventory 500,000 Accumulated Depreciation -LP, Buildings | 490000 ‘Accumulated impairment L.-LP, Bldgs, | 100000 Da investment Property Bulldings __—«(SOOAND]— ‘Accumulated Depreciation Buildings | 400.00 Ba mulated Impaent L.~Bulldings | 10,000 re nasags NO ‘tooo MMR esicet rcpt c decors res W's Sige pe it is permanently withdrawn from yse and no future ie benefits or service potential Is expected. from its al When an investment property is derecognized, the between the net disposal proceeds (if any) and its amount is recognized 25 gain or loss in surplus or deficit. Case B: From Inventories to IP Enfty A transfers a building held as inventory with a caryi amount ofP1,00,000 to investment property. ‘a | Investnent Property, Baldings 7/000,00 ‘Merchandise Invent 2.0000 Ilustration 2: Transfers from Investment Property iment asset is impaired if its carrying amount exceads its recoverable int The excess represents impairment Joss which shall be od in surplis or defi, Recovrable amount is the higher of an asset's fair value less {sts to sell and value in use. ‘Value in use is the present value of the estimated future cash flows expected to be derived from the continuing use of an asset anl from its disposal atthe end of is useful ite Case A: From IP to PPE “Emity A transfers a building with o historical cost of 1,000.00 owner-occupied property. At the date of transfer, the investme property has an accumulated depreciation of ®400,000 ant ‘accumulated impairment losses of #100,000,Chapter ‘Ateach reporting date, an entity shall asses whether ther ‘san indication that an asset may be impaired. If such indication exits, the entity shall estimate the recoverable amount of the fsset, An entity shall consider the following indications of impairment there is an indication for impairment, recoverable amount is ned for an individual asset, except when this #8 not le, in which case the recoverable amount of the cast rating unit where the individual asset belongs is determined, Gest Generating Unit (CCU) is the smallest identifiable group ff assets held sith the primary objective of generating 3 commercial retin that generates cash inflows from continuing, use that ate largely independent of the cash Inflows from other assets or groups of assets. 1. Bxteral sources of information: ‘a. Signin decline in the asset's market value. by. Significant changes in technological, market, economic, of legal environment that adversely affect the recoverable amount ofan asset ce Increase in market interest rats that averse affect th discount rate used in calculating an asset's value In use and ‘consequently ts recoverable amount [An impairment loss is recognized if the CGU’s carrying 3 exceeds is recoverable amount. The impairment loss is ted to the individual assets in the CGU on a pro rata basis, fon their carrying amounts. In allocating an impairment loss, the eatrying amount of Individual asset shal not be reduced below the highest of: Its fairvalne less costs to sell (if determinable) Its value in use (if determinable) and Zor. 1, Internal sources of information ‘a. Obsolescence or physical damage ofan asset '. Significant changes in the expected use of an asset hl adversely affect its recoverable amount (eg. the asa{ ‘becomes idle, plan to discontinue or restructure ht ‘operation fo which an asset belongs plan to dispose of thy asset earlier than expected, and reassessment of an ass useful life from indefinite to finite), ¢ Cessation of the construction of an asset before it completed 4. Indications that the economic performance of an asset is, @ ‘wil be, worse than expected (eg, the maintenance cos o the aspet ar significantly higher than expected, cash inflow from the asset are significantly lower than expected) sal of Impairment tentty shall assess whether there is any indication that an loss recognized in prior periods for an asset may no ‘exist or may have decreased, If such indication exists, the shall estimate the recoverable amount ofthat asset In making the assessment, the entity shall consider the opposites ofthe indications of impairment provided earlier sigoificantsncreae in the asset's market value ~ rather than ine, significant changes in technological... that favorably the recoverable amount of an asset —rather than adversely, After impairment, depreciation charges on an asset wl ‘based onits recoverable amount28 SS et Property 229 “The reversal of impairment shall not result to carrying BO eyed imc ecpetcaincltheibeqde periods amount in excess of the asse’s carrying amount had no £928;500 [730K x 95%) +25} impairment loss been recognized in prior periods. The reversal of impairment is recognized in surplus of Biba | Depreciation investment Property | 28500 dlfici inthe period of reversal ‘Accumulated Depreciation ~ Investment Property, Buln 28500 Mlustratos (On Janvary 1, 20x1, Entity A acquires 2 building to be held as investment property fora total cost of 1,200,000. The building is estimated t0 have a 30-year useful life and a. 5% residual val nity A uses the straight-line method of deprecation. December 31, 2038, Entity A determines an indication thet the iment loss recognized in the prioe period may no longer Entity A makes the following estimates and computations: Fair vale Tess costs f Sell nnn 800,000, ‘+ The annual depreciation is 938,000 [(1.2M x 95%) = 20) Value in use... 800,000 T2BTE | Depredation investment roperty | 38000 new recoverable amount i ®900,00 (higher). "Acaumillated Depreciation = 8,0) Investment Property, Bul seamount 1201S 73000 mulsted deprecation (2550 x3 ys) 5.0 ‘On December 31,2065, Enity A determines that the builtin ing eount= 120038 ae impaired and makes the following estimates: — ll. £650,000 Rar fie, Frc vae less costs to sel Y ated orignal deprecoon 8000x818) _ 0400 ‘Value in use. 750,000 ‘ : ing mown ha ipo ls een agnized in prio period 1203/38 296,000 ‘The impairment oss is computed as follows reversal of impairment is computed as follows: Recoverable amount (higher) 750,000 CCanying amount (12M - (380003 yr=))___1.01,000, Impairment loss (260,000) "2S | Tmpairent Lose ~ investment Property | 260,000 ‘Accumisated Impairment Loses ~ Investment Property, Buildings 261,00 ‘Residual value is revise to 5% ofthe recoverable amount.chapter et Pry es When the insurance claim is approved and becomes receivable, the entry isa follows: Nertasaie leant 90,009 spent ‘Due from GOCC's 700,000 Other Service Income 700,000 wef CA ed epi 696,000 ‘The loss event and the approval of insurance claim are Din pine rate events and therefore are accounted for separa veep | sa anivetiguctennd 664.500 9 Summary: rom the graph above the gainon Reversal of Impairmert me Loss is ®231,500 (896,10 ~ 664,50). Investment Property is land andor building held for rentals or ‘apital appreciation Investment property is initislly measured at cost and subsequently measured at cost less accunslated deprecation ant lnpuirment loess. The fair value model is not allowed for goverment entities, Transfers to or from investment property shall be made only when there is a change in use. A government entity accounts for wansfers 10 or from investment property at cost Accordingly, no gain or loss shall arise fom the transfer, except when the transfered asset is impaired, (On derecognition of an investment property, the difference between the net disposal proceeds (if any) and the carrying amounts recognized as gir or lss in surplus or dec. ‘An asset is impaired if it carrying amount exes is esoerale | amount. Recoorable amount is the higher of an asset's fair value less costs to sell and value i use, ‘The reversal of impairment shall not result to 9 camrying amount in excess of the asse’s carrying amount had no | impairment loss been recognized in prior periods. i} [TaRIRS [Accumulated impairment Losses= [231500 Investment Property, Buildings ; Reversal of Impairment Loses 231. Tova cere af pment os Compensation from third parties ‘Compensation from third partes for an investment property tl vas impaired, lost or given wp shall be recognized in surplus o ‘eficit when the compensation becomes receivable Mlustration: ‘A building, held as investment property was raze by fre, Th Duilding has a historical cost of 1,000,000 and an accumulate depreciation of 400,000. The building is insure for #700,00. The entry to recognize the loss from the fires as fellows: mck ye [emo] ‘Accumlated Depreciation = investment Property Buildings 000 Investment proper 0000