Ambay, Fenladen C.

ACD – AEC 12
TASK 1 – INVESTIGATE June 17, 2021

Answer the questions briefly.

1. What is agricultural activity in the scope of PAS 41? Give examples.
In the scope of PAS 41, agricultural activity is distinguished as the management by
an entity of the biological transformation and harvest of the biological assets, such as
livestock, crops, and other living plants and animals, for sale or for conversion into
agricultural produce or into additional biological assets. Common examples of
agricultural activities include raising livestock, fish, or poultry, stud farms, annual or
perennial cropping, cultivating orchards and plantations, forestry, and floriculture.
2. What is biological transformation?
Biological transformation is when biological assets undergo through processes
such as growth or an increase in quantity or improvement in quality of an animal or
plant, procreation or the creation of additional living animals or plants, or degeneration
or a decrease in the quantity/deterioration in quality of an animal or plants. As a result,
quantitative and qualitative changes occur in the nature of biological assets. The
harvested product of changes in the nature of biological assets is known as agricultural
produce.
3. Differentiate: Biological asset, bearer plants, agricultural produce.
First, biological asset is one of the categories of assets. It is any living animal or
plant owned by a business. Biological asset is classified into two: Consumable
biological assets or those that can be harvested as agricultural produce or sold as
biological assets and bearer biological assets or those that are held to produce.
Second, bearing plants, which are classified as PPE, play a significant role in the
production or supply of agricultural produce. They are expected to bear produce for
more than one period. They also have a weak possibility of being sold as agricultural
produce. Lastly, agricultural produce is simply the end product or the harvested
produce of the business’ biological assets.
4. How are biological assets measured under IAS 41?
IAS 41 states that biological assets are measured on initial recognition and at
subsequent reporting dates at fair value less estimated costs to sell, unless fair value
cannot be reliably measured. Furthermore, the gain on initial recognition of biological
assets at fair value less costs to sell, and changes in fair value less costs to sell of
biological assets during a period, are included in profit or loss.
5. What is included in ‘costs to sell’?
Costs to sell are the incremental costs incurred in selling or the disposal of an
asset. They include commissions paid to brokers and dealers, levies by regulatory
agencies and commodity exchanges, and transfer taxes and duties. On the other
hand, finance costs, transport costs, advertising costs, income taxes, and interest
expense are excluded in costs to sell.