CHAPTER 4 : Inventories(PAS 2) and Agriculture(PAS
41)
INVENTORIES (PAS 2)
 Assets that are held for sale in the ordinary course
of business. The ordinary course of business is the
usual transaction, customs and practices of a certain
business. In short, these are the activities that are
necessary, normal to the business to achieve its
profit making objectives. Ang inventories ay mga
finished goods which are ready for being sold. Kung
occasionally na ibebenta ng owner ang ilang piraso
ng kanyang PPE or machines, hindi 'yon kabilang sa
inventories kase ang occasional sales ay hindi
kasama na activity sa ordinary course ng business.
Dagdag information lang, ang occasional sale ay
pagbebenta ng tangible na business assets either
bago ito o gamit na na kung saan 'yung may-ari ay
nililiquidate n'ya 'yung kanyang business sa isang
transaction sa iisang buyer din.
 In the process of production for such sale. Syempre,
bukod do'n sa finished goods na ready for being
sold, the goods in the process of production is also
an inventory. Ang work in progress ay kabilang rin
as inventories.
 In the form of materials or supplies to be consumed
in the production process or in the rendering of
services. Para maclassify natin ang inventories,
dapat ang tingnan natin is kung ano ba ang purpose
nito. Kung ito ba ay merchandise, o kung production
supplies, raw materials ba, work in process or
finished goods.
NET REALIZABLE VALUE - the estimated selling price in
the ordinary course of business less the estimated costs
necessary to make the sale.
- Yung deductions sa estimated selling price ay
pwedeng yung gastos mismo sa pagtatransport at
pagdidispose nung inventory. Ayon, ginagamit s'ya
to determine the lower of cost or market ng on-
hand na inventory items. Ang net realizable value
din is yung amount expected na marerealized mula
do'n sa pagbebenta ng finished goods. If raw
materials naman, it will be the replacement cost of
raw materials kunwari yung kanilang market price
na. Tapos kung work in progess naman, it will be the
selling price minus the cost of conversion.
FORMULA FOR NET REALIZABLE VALUE
- we must subtract the total selling cost to the
expected selling price. So first, dapat alamin natin
yung market value nung inventory item. 'Yon kase
yung magseserve as the expected selling price.
Tapos, isummarize natin 'yung lahat ng naging costs
na nauugnay para makumpleto at mabenta yung
asset. Kunwari, yung nagastos sa final production,
testing at sa preparation cost. Pag nasummarize na
natin 'yon, edi meron na tayong total selling cost.
Imminus na 'yon do'n sa nakuha nating expected
selling price and nakuha na natin ang net realizable
value.
EXAMPLE:
Company ABC Inc. is selling the part of its
inventory to Company XYZ Inc. For reporting purposes,
ABC Inc. is willing to determine the net realizable value
of the inventory that will be sold.
The expected selling price of the inventory is P
250,000. However, ABC Inc. needs to spend P 40,000 to
complete the goods and an additional P 10,000 for
transportation expenses. Considering the available
information, the net realizable value of the inventory
should be calculated in the following way:
NRV= Php250,000-(Php40,000 + Php10,000)
= Php200,000
- Makikita do'n sa solution na pinag-add 'yung P
40,000 at P 10,000 which is yung costs ng ABC Inc.
sa transportation and para makumpleto yung goods
bago saka ito sinubtract do'n sa expected na selling
price nila ng inventory na P 250,000. So, P 250,000
minus the sum of P 40, 000 and P 10,000 is equal to
P200, 000. Therefore, ang net realizable value nung
inventory item ng Company ABC Inc. is P200, 000.
FAIR VALUE - the price that would be received to sell an
asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date.
- Ang fair value, ito yung presyo na kung saan ang
isang asset ay pwedeng palitan sa pagitan ng willing
na buyers at ng seller sa isang market place o di
kaya ay pang settle ng utang.
INVENTORIES can include any of the following:
1. Goods purchase and held for resale and buildings
held for resale.
- For example, yung goods held for resale ng mga
retailers o di kaya ay land.
2. Finished goods produced.
- So finished goods are the final items that are ready
for sale in the market. Ito yung mga items na
nakapasa sa lahat ng stages ng production and
quality. Example, ang isang cookie manufacturer,
yung mga nakabalot na na ipinadala sa market para
mabenta pagkatapos ito macheck kung qualify ba is
an example of finished goods.
3. Work in progress being produced.
- If yung raw materials ay napadala na for processing
and hindi pa s'ya naaapproved as finished goods, ito
 ang process na tinatawag na work in progress. Do'n
sa cooking manufacturer, after maprocess nung
mga raw materials tapos namold na yung mga
cookies, dadaan muna sila sa quality check bago sila
makapasa para sa final packaging. And lahat nung
mga cookies na naghihintay for approval is
considered as work in progress.
4. Materials and supplies awaiting use in production
process or the raw materials.
- Ang raw materials ay binubuo ng lahat ng items na
pinaprocess para makagawa ng final product. Don
sa cookie manufacturer, ang mga raw materials n'ya
are milk, flour, sugar, etc na dumadaan sa iba't
ibang stages of production.
MEASUREMENT OF INVENTORIES.
The standard states that inventories should be
measured at a lower of cost and net realizable value.
- So the principle states that we must value the
inventory either at the cost of inventory or at its net
realizable value. The logic behind measuring the
inventory at "lower of cost and net realizable" is
that the asset should not be carried in excess
amounts likely to be realized from selling or using
them. Yung inventories, maaaring sa net realizable
value sya mailalagay if yung inventories ay
nadamged na , obsolete or bababa ang kanilang
selling price.
COST OF INVENTORIES
comprises the cost of purchase, the cost of conversion
and any other cost incurred in bringing the inventories
to their present location and condition.
- The cost of inventories is recognized as an expense
in the period in which the related revenue is
recognized. So to get the cost of inventory, ipapag-
add lang yung cost of purchase, cost of conversion
at yung other cost.
COST OF PURCHASE- it is how much it cost you.
Nakapaloob dito ang purchase price, import duties,
taxes, transport, handling and other costs na direktang
kaugnay para makuha o marecive natin yung finished
goods or materials less trade discounts, rebate and
other similar amounts.
1. Purchase price, syempre yun yung kung magkano
yung bili natin sa isang goods.
2. Import duties naman is maaapply kung tayo e may
binili overseas. Maaaring may mga taxes na pedeng
bayaran if galing sa ibang bansa yun. Also, meron
din sa transportation para makuha nating yung
asset. Example is freight in. Pati handling costs
kasama do'n kase syempre hindi naman natin
marereceive yung asset ng maayos kung hindi ito
nahhandle ng maayos. So yon, para naman makuha
ang cost of purchase ipapagadd ang purchasw price
saka yung ibang fees na nagastos para mareceive
natin yung finished goods. Yung mga discounts and
rebate ay hindi sya kasama sa cost of purchase sya
ay minaminus. Ang rebates kase pedeng
mareimbursed ang asset or take credit against
liabilities kaya dapat isubtract.
COST OF CONVERSION.
1. Costs that are directly related to the units of
production . These are the expenditures incurred to
process raw materials into finished goods and is
applicable only to the manufacturing business.
Example nito ay direct materials, direct labor and
production overhead.
2. Fixed and variable production overheads that are
incurred in converting materials into finished goods,
allocated on a systematic basis. To compute the
cost of conversion, we need to add the direct labor
and manufacturing overhead.
FIXED PRODUCTION OVERHEAD- indirect costs of
production that will remain relatively constant
regardless of the volume of progress. Ang allocation
nito to the cost of conversion is base sa normal na
activity ng production facility. For example, factory rent,
depreciation and maintenance ng mga equipment,
management and administration.
VARIABLE PRODUCTION OVERHEAD- indirect costs that
vary directly or nearly directly with the volume of
production. Ito ay allocated to each unit of production
depende sa actual usage of the production facility.
Example nito ay yung mga indirect materials at indirect
labor.
IMPORTANT POINT IN COST OF CONVERSION.
1. Normal capacity is the expected achievable
production based on the average over several
periods/seasons, under normal circumstances.
2. The above figure should take account of the
capacity loss through planned maintenance.
3. If it approximates to the normal level of activity,
then the actual level of production can be used.
4. Low production or idle plants will not result in a
higher fixed overhead allocation to each unit.
5. Unallocated overheads must be recognized as an
expense in the period in which they were incurred.
6. When the production is abnormally high, the fixed
production overhead allocated to each unit will be
reduced, so avoiding inventories being stated more
than the cost.
7. The allocation of variable production overheads to
each unit is based on the actual use of production
facilities.
 So the production process may result in more than
one product being produced simultaneously. 14th
slide \
OTHER COST.
- It is only included in the cost of inventory only to
the extent that they incurred in bringing the
inventory to the present location and condition. An
example of other cost is cost of designing products
for specific customer need. Merong mga example
ng costs na hindi kasama sa cost of inventories and
nirerecognize as expense in the period in which
they are incurred.
1. Abnormal amount of waste materials, labor and
other production costs. Halimbawa nito is yung mga
broken machineries.
2. Storage cost unless it is necessary for the
production process. Do'n pa lang sya pwede iinclude
sa inventories.
3. Administrative overheads not incurred to bring
inventories to their present location and condition.
Here includes the general administrative like
accounting department, etc.
4. Selling costs. It is also called as operating expnse but
related to selling.
TECHNIQUES FOR THE MEASUREMENT OF COST.
We have 2 techniques for the measurement of cost.
Itong 2 techniques na to are used to estimate the value
or the cost of the inventory.
1. Standards costs.
- These are set up to take account of normal
production value like the amount of raw materials
used, labor time, and etc. So, itong standard costs
na to, estimates sya ng actual costs na mai-incur sa
production process ng isang company. Standard
costing is done kapag ang ginamit ng company in
assigning the value of inventory ay standard costs sa
halip na yung actual costs ng direct materials, direct
labor at manufacturing overhead.
- They are reviewed and revised on a regular basis.
Since standard costs are usually slightly different
from actual costs, periodically, dapat nacacalculate
at narereview sya to make necessary adjustments
based sa variance na macocompute nila.
- Variance- difference between the actual cost and
the standard cost. Masasabing favorable ang
variance kapag mas mataas ang expected or
standard cost kesa sa actual cost since ibig sabihin
non yung actual cost na na-incur ay hindi lumagpas
sa budget or dun sa standard cost na sinet.
Unfavorable naman yung variance kapag mas
mataas ang actual costs kesa sa standard cost kasi
ibig sabihin non, yung actual cost na naincur ay
lumabis dun sa standard cost na inassign sa
inventory, so maalin man dun kailangan magkaroon
ng adjustments depende kung paano ia-analyze
yung variance. Yung regular na pag-analyze sa
standard cost at sa variance will let the
management know kung may changes ba na
kailangang gawin sa standard costs to bring them
into closer alignment with the actual costs.
2. Retail method.
- This is often used in the retail industry where there
is a large turnover of inventory items, but still have
similar profit margins. This method is used usually
by retailers to estimate their ending inventory
balances.
- The only practical method of inventory valuation
may be to take the total selling price and deduct an
overall average profit margin. Overall profit margin,
yan yung percentage or portion ng sales revenue na
nakikeep ng company after deducting all direct
costs or yung costs of goods sold. So pag binawas
yung overall profit margin sa total selling price,
makukuha yung approximation of cost.
COST FORMULA
There are different methods in determining the cost of
inventories.
1. First-In - First-Out Method
2. Last-In - First-Out Method
3. Weighted Average Method
4. Specific Identification.
FIRST-IN, FIRST-OUT (FIFO METHOD).
- This method assumes that “the goods first
purchased are first sold”. Hence, the goods are sold
in the order they are purchased. So kaya nga First-
In, First-Out, it is to be assumed na yung first in, or
yung unang inventory na naproduce or naacquire ng
business ay yun din yung unang mabebenta,
magagamit or madidispose, and then ang natitira as
ending inventory ay yung recent or latest inventory
na.
- The inventory is thus expressed in terms of recent
or new prices while the cost of goods sold is
representative of earlier or old prices. Yung cost na
magrereflect sa Cost of Goods Sold or sa income
statement ay yung older costs, kasi ano bang laman
ng Cost of Goods Sold? Yan yung total costs used to
create a product or service which has been sold,
and sa FIFO Method, assumed nga na yung older
inventory ang unang nasosold or unang naeexhaust,
so ang gagamitin in computing COGS in FIFO
Method ay yung cost nung older inventory. Tapos
ang magrereflect sa Ending Inventory or sa
Statement of Financial Position ay yung cost ng
most recent purchases kasi nga under FIFO method,
assumed na yung most recent purchases will be left
untouched hangga’t hindi nauubos yung old
purchases, kaya yung recent costs ang magiging
value ng unsold inventories.
LAST-IN, FIRST-OUT METHOD (LIFO METHOD)
- The standard does not permit anymore the use of
this method
- It assumes that “the goods last purchased are first
sold”. So Last-In, First-Out, it is to be assumed na
yung last in, or yung most recent inventory na
naproduce or naacquire ng business ay yun din yung
unang mabebenta, magagamit or madidispose, and
then ang natitira as ending inventory ay yung oldest
or earliest inventory pa.
- The inventory is expressed in terms of earlier or old
prices kasi nga ang assumed na unsold inventories
ay yung earlier purchases pa. And then the cost of
goods sold is representative of recent or new prices
dahil ang goods sold ay kinukuha sa recent or new
inventory purchases. So complete opposite lang
talaga sya ng First-In, First-Out Method.
 But before we proceed, bakit ba hindi na allowed by
the standard ang paggamit ng LIFO Method?
Because the IFRS shifted its focus on the balance
sheet or on the Statement of Financial Position
instead of the Income Statement. This shift requires
that the figures reflected in the balance sheet
should be according to the present market
conditions. E diba sa LIFO Method, ang narerecord
sa SFP ay yung old costs, so hindi sya in line with the
requirement of the standards. Unlike FIFO Method
na ang narerecord sa SFP ay yung recent costs,
which is yun yung in line sa sinasabi nilang “the
balance sheet should be according to the present
market conditions”.
WEIGHTED AVERAGE METHOD.
It is computed by dividing the total cost of goods
available for sale by the total number of units available
for sale.
The cost of Total Goods Available for Sale consists of the
Costs of Beginning Inventory and of Purchases made
during the period, while the number of units of Total
Goods Available for Sale consists of the number of units
in the beginning inventory and the number of units
purchased. So, bale the formula for computing the
Weighted Average Unit Cost is the sum of the Cost of
Beginning Inventory and the Total Cost of Purchases
During the Period divided by the sum of the Number of
Units in the Beginning Inventory and the Total Units
Purchased.
SPECIFIC IDENTIFICATION.
- This means that specific costs are attributed to
identified items of inventory.
- This method is appropriate for inventories that are
segregated for a specific project and inventories
that are not ordinarily interchangeable, meaning
those that are individually unique. In this method,
ang nagrereflect both sa Cost of Goods Sold and
Ending Inventory ay yung actual costs nung specific
items. For example, itong certain inventory with a
serial number of ABC123 costing P10,000 is sold,
the amount that will be recorded sa Cost of Goods
Sold is also P10,000. Tapos, if ever naman na that
certain inventory remains unsold, the amount to be
charged as ending inventory is also P10,000 pa rin.
- And then, since actual cost naman ang ginagamit,
the computation in this method is simply done by
multiplying the units on hand by the actual unit
cost.
This method is not appropriate, however, when
inventories consist of large number of items that are
ordinarily interchangeable, kasi in that case the entity
will have to choose between First-In, First-Out Method
and Weighted Average Method.
CONSISTENCY-DIFFERENT COST FORMULAS FOR
INVENTORIES
For inventories that are not ordinarily interchangeable
or are not produced and segregated for specific
projects, only two cost formulas are allowed by IAS 2.
1. First-In, First-Out Method or the
2. Weighted Average Method.
And then, since an entity has to be consistent with the
treatment of transactions, IAS 2 provides that an entity
should use the same cost formula for all inventories
having similar nature and use to the entity, pag FIFO
Method, FIFO Method lang, pag Weighted Average
Method, Weighted Average Method lang, for the
records to be consistent.
MEASUREMENT OF INVENTORY
As a general rule, assets should not be carried
at amounts greater than those expected to be realized
from their sale or use. Hence, inventories shall be
measured at the lower of cost and net realizable value,
also know as LCNRV.
- So ang point lang nito is, since hindi pwedeng ang
value na assets na marerecord ay greater than what
is expected to be realized from their sale or use,
kapag irerecord ang inventory as expense, yung
lower of cost and net realizable value ang
gagamitin, meaning whichever is lower between
cost and net realizable value, yun ang gagamiting
amount for the measurement of inventory. This will
be further discussed in the next slides.
net realizable value
- It is the estimated selling price in the ordinary
course of business less the estimated cost of
completion and the estimated cost of disposal.
- It’s different from fair value in the sense na fair
value is the value of an asset if it were to be sold on
an open market, while net realizable value is the
amount to be realized upon selling or discarding an
asset, and upon deducting the cost of selling or
discarding an asset from the selling price.
Situation in which NRV is less likely to be less that cost,
i.e., when there has been:
1. An increase in costs or fall in selling price. Ito self-
explanatory, pag nagkaroon ng increase in costs
syempre tataas ang cost in comparison to the NRV.
Kapag naman bumaba ang selling price, syempre
bababa ang NRV, so in these cases it is likely that
NRV will be less than cost.
2. A physical deterioration in the condition of
inventory. Physical deterioration of inventories
leads to a loss in the value of an asset; hence
bababa ang NRV
3. Obsolescence of product. Obsolescence, means
nagkaroon ng loss sa usefulness or naging outdated,
like the product is no longer useful, so in this
situation, syempre it’s very likely na mas mababa
ang marealize mong value from that product than
the cost
4. A decision as part of the company’s marketing
strategy to manufacture and sell products at a loss.
Directly stated na dito, strategy to manufacture and
sell products at a loss, so it is likely na talagang mas
mababa ang marerealize na value in this situation
than the cost, but it’s done as a marketing strategy
naman.
5. Errors in production or purchasing . Kapag may
errors sa production process or purchasing, it is
likely din na ang NRV ay lower kesa sa cost.
ACCOUNTING FOR INVENTORY WRITE-DOWN
Inventory write-down is done to reflect the value na
nalo-loss ng inventory kapag mas mataas ang actual
cost sa net realizable value ng inventory.
If the cost is lower than net realizable value,
there is no accounting problem because the inventory is
stated at cost and the increase in value is not
recognized. Meaning, kapag mas mababa ang cost kesa
sa NRV, there’s no need for a write-down since the
inventory is already stated at cost, and hindi naman
kailangan irecognize yung increase in net realizable
value.
However, if the net realizable value is lower
than cost, the inventory is measured at net realizable
value. Inventories are usually written down to net
realizable value on an item by item or individual basis.
Kapag naman mas mababa ang NRV kesa sa cost, it
should call for an adjustment. Magkakaroon ng
inventory write down dahil diba inventories are stated
at cost, e mas mababa yung value na marerealize upon
selling the inventory kesa sa recorded na amount ng
inventory, kaya kailangan magkaroon ng adjustments by
doing inventory write-down.
RECOGNITION AS EXPENSE
The following treatment is required when inventories
are sold:
a. The carrying amount is recognized as an expense in
the period in which the related revenue is
recognized. So, when an inventory is purchased,
diba it is recorded as an asset, the inventory will be
recognized as an expense in the period in which the
related revenue is recognized, or in Tagalog, kung
kailan mo mabenta yung inventory, dun pa lang sya
malilipat from being an asset to being part of Cost
of Goods Sold
b. The amount of any write-down of inventories to
NRV and all losses of inventories are recognized as
an expense in the period the write-down or loss
occurs. This one’s self explanatory, too. Kung kailan
nag-occur yung write-down or loss, dun din
marerecognize and marerecord as expense yung
amount nung write down or loss.
c. The amount of any reversal of any write-down of
inventories, arising from an increase in NRV, is
recognized as a reduction in the amount of
inventories recognized as an expense in the period
in which the reversal occurs. Kapag nagkaroon ng
write down dahil mas mababa ang net realizable
value kesa sa cost, so kailangan pababain ang value
ng inventory by the use of Inventory Write-Down.
So ano naman tong reversal na to? Reversal is
needed kapag nagkaroon ng increase in Net
Realizable Value, so kailangan i-reverse yung entry
for inventory write-down. However, take note that
the amount of reversal shall not exceed the
allowance balance. For example, the amount
recorded for inventory write down is ₱50,000. And
then, nagkaroon ng ₱60,000 increase sa Net
Realizable Value, kahit 60k yung nagging increase sa
NRV, ₱50,000 lang ang amount na irerecord for the
reversal.
The write-down of inventory to net realizable value is
accounted for using the allowance method.
ALLOWANCE METHOD
- The inventory is recorded at cost and any loss on
inventory write-down is accounted for separately.
So lagi daw yung cost ang recorded amount ng
inventory, but since the inventory has to be
measured at the Lower of Cost and Net Realizable
Value, magkakaroon ng instances na the inventory
must be measured at Net realizable value dahil
naging mas mababa ang Net realizable value kesa
cost which calls for adjustments, and in that case,
para marecognize yung loss, magkakaroon ng
separate account for the recognition of loss, kaya
rin allowance method is also known as Loss
Method.
- So in recording the inventory write down, a loss
account which is “Loss on Inventory Write-Down”
is debited while a valuation account which is
“Allowance for Inventory Write-Down” is credited.
- This method is used in order that the effects of
write-down and reversal of write-down can be
clearly identified.
AGRICULTURE (PAS 41)
it applies the requirements of IFRS to the treatment of
BIOLOGICAL ASSETS. In agriculture, we will tackle on
how we are going to deal with our biological assets.
 It was issued in February 2001.
 It seeks to harmonize practice in accounting for
agriculture, which demonstrates fundamental
differences in its nature and characteristics to other
business activities. We are all aware naman na
there really are businesses na aligned sa industry ng
agriculture. So, basically, kakaiba ang agriculture
from other business activities because mahirap
iapply yung traditional accounting methods sa mga
agricultural activities. Though this PAS, magiging
uniform pa rin and aligned pa rin ito sa accounting
standards.
TERMS TO REMEMBER
terms that we must know by heart because these will
be essential and are mostly mentioned dito. Kailangan
alam muna natin itong mga ito for us to understand
fully the PAS 41.
Biological Assets. These are the living animals and/or
plants.
- Makikita natin yung word na living so dapat buhay
yung plants and animals para matawag nating
biological assets. Examples ng animals ay yung mga
cows, sheep, pigs etc. Yung sa plants naman, yan
yung mga trees, vines etc. Dito pinakaumiikot yung
business ng isang entity. Take note, hindi lahat ng
plants and animals na makikita or inaalagaan ng
company can be considered as biological assets. It
should have something that can relate to
agriculture.
Biological transformation. comprises the processes of
growth, degeneration, production, and procreation
that cause quantitative and qualitative changes in
biological asset.
- In here, yung mga biological assets natin ay
nagkakroon ng changes in the purpose of improving
its quality and increasing its quantity. Like for
example yung trees, syempre magssimula yun as
seeds. Bibili ng buto then itatanim then lalaki and
maggrow yung seed na yon into trees. Another
example naman yung mga sisiw lumalaki sila in the
process of biological transformation. Pwede rin
ditto yung breeding kasi quantitative changes diba
so magpaparami ng aso or pusa. If may biological
transformation, syempre meron tayong ihharvest.
Harvest. the detachment of produced from a biological
asset or the cessation of a biological asset’s life
processes.
- Simply, eto yung process na it’s either kukunin mo
na yung naging bunga ng tinanim mo or kakatayin
mo na yung chicken or baboy or kukunin mo na
yung milk ng baka.
Agricultural Produce. is the harvested product of an
entity’s biological assets.
- So, Ito na yung nakuha mo or yung pwede mong
makuha out of your biological asset. Raw pa siya
and hindi pa siya processed, purely milk, harvested
cotton, or di naman kaya ay yung wool ng sheep.
Agricultural Activity. is said to be the management by
an entity of the biological transformation and harvest
of biological assets for sale, into agricultural products or
into additional biological assets.
- Una sa lahat, if may agriculture, then may
agricultural activity. Makikita natin here yung mga
naka bold, himay himayin natin, management of
biological transformation and harvest of biological
assets, Magfocus muna tayo sa management of
biological transformation. Since biological assets are
capable of biological transformation then ditto
pumapasok yung unang feature ng agricultural
activity which is capability to change. If ang
biological assets natin ay nakikita nating pwedeng
mggrow, pwedeng dumami then its is capable to
change then it is also part of agricultural activity.
Second feature ng agricultural activity is Biological
transformation is being managed dapat or
Management of Change. In simple terms, ditto ikaw
yung dahilan ng pagbabago. Syempre hindi naman
natin pwedeng pabayaan nalang yung tinanim natin
na tumubo nalang, need nyan ng oras and care,
then yung animals na part ng biological asset natin
para manatiling buhay dapat pakainin, and hindi
maaccomplish ang lahat ng to if walang
nagmamanage non. Sunod naman yung harvest of
biological assets. Nabanggit ko na yun kanina so
kapag may harvest ibig sabihin may agricultural
activity. In which the third feature can be presented
at yun ang measurement of change. There can be
two changes na nabanggit ako kanina at yun ay ang
Changes in qualitative and quantitative. Change in
quantity Syempre if dumami or nabawasan man ang
ating biological asset after harvest or while in the
process of transforming. Example nito is yung the
no. of mangoes produced ganun. The yung change
in quality naman if how ripe or unripe ba yung
manga. Additionally, nabanggit din dito na ang
agricultural activity raw ay pwedeng magdagdag ng
additional biological asset, like yung sa chicken pag
nagka sisiw, then pwedeng magparami rin yung mga
sisiw
Group of Biological Assets. An aggregation of similar
living animals or plants
Fair value. price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction
between market participants at the measurement date
(IFRS).
- Ito naman yung price ng biological asset natin
kapag binenta natin base sa quality nito. So ito
iccheck natin if fair ba yung price para sa quality ng
binebenta natin ganon po. Kailangan natin iadjust
from cost na pagbili dun sa current state ng bebenta
natin. Kasi dahil nga sa changes ng assets natin
syempre magbabago rin yung worth niyan. For
example ang baboy, binili mo isya as 30k, then nung
ibebenta mo na alam mong nagbago to kasi
inalagaan mo pinakain mo at malusog siya and kita
 ang changes physically and nagappreciate din
syempre yung value, so from 30k pwede mo na
siyang ibenta as 70k ganun.
Carrying amount. It is the amount at which an asset is
recognized in the statement of financial position.
- Ito naman ay yung value or amount na ilalagay natin
sa sfp na natin. Meaning after ilesss ang mga losses
or accumulated depreciation ganun. Bale pwedeng
after some years tsaka pa ito magrreflect kasi nga
nagkakaroon ng depreciation.
IMPORTANT POINTS
Biological. relates to life phenomena‟, living animals
and plants with an innate capacity of biological
transformation which are dependent upon a
combination of natural resources.
- So kapag naencounter natin ang agriculture, laging
connected to sa biological. Or simply lahat ng may
buhay. And kapag may buhay, chances are it can
change and dapat mag change. Inevitable dinyung
change na to kasi sabi nga ditto ay nakadepende sa
natural resources which are sunlight water and etc.
Transformation. It involves physical transformation,
whereby animals and plants undergo a change in
biological quantity overtime.
- Ayon dahil nga capable sa change then nagkkaroon
talaga ng pagbabago sa mga biological assets
pwedeng tumataba ganun lumalaki. Dahil din sa
nakukuha nito in the process. Sa pagtagal
imposibleng walang maging pagbabago dyan.
Management. biological transformation is managed.
i. Conditions are stabilized or enhanced
ii. The transparency of the relationship between
inputs and output determined by the degree of
control (intensive versus extensive)
iii. It is different from exploitation through extraction,
where no attempt is made to facilitate the
transformation.
- If may nagmmanange nagiging organize and hindi
chaotic yung agriculture. So kapag ganon alam natin
na magiging maganda ang outcome kapag well
handled. Or alam natin na may patutunguhan kasi
nallead natin. The way we control these matters can
determine if sa right path nga ba yung nangyayari
transformation or process. If very hands on tayo
then might as well according sa gusto natinyung
kalalabasan. In managing din kasi hayaan lang natin
tong mga biological assets itake yung mga need
niya. As long as nagagwa natin yung part natin.
Hindi dapat nappwersa para mapabilis yung
transformation. Wag natin immanipulate ang
process.
- Ang sinasabi naman ditto is dapat mamaintain natin
yung pagcclassify kung anong klaseng halaman ba
or anong kalaseng animals yung minamanage natin.
Para alam natin if saan ba tayo mas magexert pa ng
effort. Para mapanatili natin yung business. Kasi
baka mamaya mababa pala yung quality saying lang
din.
- And in that case papasok ang sustainability. Para
masustain natin yung agricukture dapat
continuously maganda ang quality and mataas ang
quantity o dami.
Produce. agricultural produce is diverse and may
require further processing before ultimate
consumption.
- Hindi mo maibebenta ng ganon ganon yung mga
naharvest mo kasi kailangan magundergo ng mga
mga biological assets sa process. Literally,
everything about agriculture passed through
process. Kasi iba iba nga yan. Kumbaga hindi sila
pareparehas ng sitwasyon and ng pangangailagan.
SCOPE. So The standard applies to these three elements
that form part of, or result from, agricultural activity:
 Biological Assets. except bearer plants
 Agricultural produce at point of harvest
 Government grants.
The standard does not apply to agricultural land or
intangibles assets related to agricultural activity (IAS
38). After harvest, IAS 2 is applied.
Una yung land, maybe maiisip natin bakit kasali to sa
exception, bale exception siya because included na siya
sa PAS 16 and PAS 40 which are Property, Plant, and
Equipment and Investment Property. Then yung
intangible assets naman hidni talaga siya aaplyan ng PAS
41 because meron nang PAS 38 which is an accounting
standard for intangible assets. Yung bearer pants naman
ay included na rin sa PAS 16 But yung naproduce from
those bearer plants yun yung aapplyan ng PAS 41. Lastly
yung government grants that is related to bearer plants
din ayhindi aapplyan ng Pas 41 because meron na ring
PAS 20. Basically, exceptions tong mga to simply
because may existing nang PAS na applicable sa mga ito.
Doesn’t mean na related siya sa PAS 41 like yun nga
yung land bearer plants etc ay eto na yung iaapply mo,
no, because there are already existing ones. With
regards to AFTER HARVEST, syempre hindi na PAS 41
ang kailangan na iapply dun inventories na. So ang Pas
41 iaapply mo lang siya up to the point of harvest mo
lang kasi andun na papasok yung PAS 2. Accounted na
sila by Pas 2 kasi yung mga naharvest nating agricultural
produce magiging inventory na. Kasi after mo iharvest
ibebenta mo na siya eh diba? Example can be while a
fruit is growing from a tree, covered pa rin siya ng PAS
41. Once na naharvest mo na yung fruit under PAS 2 na.
So ayun.
BIOLOGICAL ASSET - are the core income-producing
assets of agricultural activities, held for their
transformative capabilities.
- Let me remind all of you na ang industry na
pinaguusapan natin is agriculture. So yung mga
biological asset ang main source of income nito.
And sa biological assets din mostly umiikot ang
business activities ng agriculture. Mainly puro
pagpproduce siya gaya nga mga nabanggit ko
kanina. And hindi naman natin pwedeng ibenta
basta basta yung mga assets natin diba kasi nga
 kailangan nitong dumaan sa mga transformations.
Ang magkakaroon lang ng pagbabago kapag
namanage natin yun.
BIOLOGICAL TRANSFORMATION LEADS TO VARIOUS
OUTCOMES:
Asset Changes.
Growth. Increase in quantity and or improvement in
quality.
- Basically, Pag dumami ang biological assets natin
then it is growth. If napalaki natin or nakita natin
yung paglaki physically like for example yung sisiw
ulit, pag naging chicken na sila then it can also be
represented as growth.
Degeneration. decrease in quantity and or in quality.
- So eto naman is opposite ng growth. Kasi ito naman
is nanggaling sa growth. Tumatanda kumabaga yung
biological assets natin which is also an outcome of
biological transformation. So automatically yung
mga napadaan natin sa growth sooner ay
magddegenerate din yan.
Creation of New Assets.
Procreation. producing separable living animals.
- Eto naman is about pagpaparami ng mga offspring.
Ang nangyayari ditto is dumadami yung assets mo
and Alam natin na kapag nagpapadami sila
nagbabago yung itsura nila. Yung idea palang na
may bagong naging asset then mayroong
transformation.
Production. producing separable non-living product.
- So dito naman is naguundergo sa panibagong
process or ginagawan ng innovation yung
agricultural produce.
THE IAS DISTINGUISHES THEREFORE BETWEEN TWO
BROAD CATEGORIES OF AGRICULTURAL PRODUCTION
SYSTEM:
Consumable: which are animals/plants themselves are
harvested
Bearer: animals/plants bear produce for harvest.
CONSUMABLE BIOLOGICAL ASSET
According to Pas 41.44, Consumable Biological
Assets are those that are to be harvested as agricultural
produce or sold as biological assets.”
- So sabi dito ito daw yung mismong agricultural
produce na binebenta. From the word itself
consumable, ito yung pwedeng maubos. Kasi kapag
naharvest mo na, wala na. Naibenta mo na eh so
ang tendency magtanim ka ulit or magparami ka
ulit. Eto yung mga examples niya livestock intended
for the production of meat, livestock held for sale,
fish in farms, crops such as maize and wheat,
produce on a bearer plant, trees being grown for
lumber.
BEARER BIOLOGICAL ASSETS
Plant based bearer biological assets
 Trees grown in plantations: grape vines, rubber
trees and soil palms.
 Used solely to grow produced crops over several
periods and are not in themselves consumed.
 Once they reach maturity, the only economic
benefit they produce comes from the agricultural
produce they create.
Ito ang mga plants at animals na hindi lang isang beses
na nagkakaroon ng AGRICULTURAL PRODUCE. Kahit na
nag produce na sila, capable parin silang magproduce
katulad ng mga fruit bearing trees in short sila yung mga
namumunga at hindi namamatay for one harvest lang
livestock like baka for the purpose of producing milk,
trees para sa pag produce ng fruit katulad ng saging or
apple
BIOLOGICAL ASSETS
 Removed from the scope of IAS 41 and should be
accounted for under IAS 16 Property, Plant and
Equipment.
- Not all relaed to agriculture is under IAS 41. Bearer
plant is considered equipment kasi sila ang mga
bagay na ginagamit to produce inventories kasi nga
equipment are used to produce inventories. And
also IAS 16 or PPE is expected to be used for more
than one year kaya for the bearer biological assets
to be recognized as PPE dapat ineexpect sya na
magproduce for more than one period. Meaning, if
bearer plant can only bear produce for one period
or less, magiging biological asset na ulit.
 Measured at accumulated costs until maturity and
are then subject to depreciation and impairment
charges.
- Kapag part PPE nag dedepreciate, at nirerecognize
depreciation expense every year. Madedepreciate
lang sila if and only if mature. If immature di pa
magdedepreciate kasi according to IAS 16
depreciation will begin or commence only if PPE is
already available for use. Example ay puno, hindi pa
sya magdedepreciate kasi immature pa sya.
RECOGNITION
Animals or plants should be recognized as assets in the
following circumstances.
1. The entity controls the assets as a result of past
events. 
- Kapg sinabi nating past events, ito yung
acquisition of biological assets. As an entity
dapat may control ka over your own asset.
2. It is probable that the future economic benefits
associated with the asset will flow to the entity.
 - Meron dapat economic benefits na inaasahan
sa asseta t ang chance na may mag flow na
benefits ay probable. Nakikita ito sa significant
physical attributes for example inahing baboy
that no longer have the ability to reproduce,
therefore di na sya biological asset, its value
decreases and most probably ay ibebenta na
sya as gricultural produce. Ito ay about sap ag
memeasure ng economic benefit, kung gano
kalakas magreproduce, magproduce ng harvest
or agricultural produce, na nakaktulong sa
pagmemeasure ng economic benefit.
3. The fair value or cost of the asset to the entity
can be measured reliably.
- Dapat sa lahat ng assets dalawa ang rule bago
marecognize, dapart may probability o probable
yung chance na may pumasok na benefit at
dapat yung fair value or cost can be ameasured
reliably because how can we record the asset if
it is not measured reliably.
MEASUREMENT
 IAS requires that each year end, all biological assets
within the scope should be measured at fair value
less estimated point-of-sale costs.
 If a fair value cannot be determined because
market-determined prices or values are not
available. Then the biological asset can be
measured at cost less accumulated depreciation
and impairment losses.
- If at initial measurement, the fair value less cot to
sell cannot be measured reliably, then the biological
asset can be measured at cost less accumulated
depreciation and impairment losses. But if the fair
value less cost to sell ay natermine na the
measurement will be changed and these changes ay
mapupunta sa profit or loss.
MEASURING FAIR VALUE
 The primary indicator of fair value should be net
market value.
 IFRS 13 requires the fair value of a biological asset
to be determined by reference to the principal
market for the asset.
- Kapag sinabing principal market ito yung market
wherein the number of buyers and sellers is
sufficient so that the price cannot be controlled by
either buyers or sellers
Fair Value  harvested and requires more than 12 months
(Commissions to Brokers)
(Levies by Regulators)
(Transfer Taxes and duties)
Fair Value less cost to sell
- Ang cost to sell ay mga incremental cost that
are directly attributable the disposal of the
asset . Meaning all of the cost incurred upon the
disposal of the asset will be deducted to the Fair
value. Commisions to broker- if nagamit pa ng
broker para mabenta ang asset. Levies by
regulators. Transfer taxes and duties na non-
refundable if refundable hindi kasama sa cost to
sell.
RECOGNITION
 A gain or loss arising on initial recognition of a
biological asset at fair value less estimated point of
sale costs and from a change in fair value less
estimated point of sale costs is included in profit or
loss in the short period in which it arises.
- It is said that kapag may initial recognition, may
gain ad losses na. Example of Gains ay newborn
biological asset or harvest of agricultural
produce. Loss naman due to costs to sell
because even if kakabili lang ng biological asset ,
pede na tayong magrecognize ng loss. Dahil sa
fair value less cost to sell.
 Changes in fair value can arise due to both physical
changes in the asset and price changes in the
market. Entities are encouraged to make a separate
disclosure of these two elements in order to
facilitate performance appraisal. 
- Kapag sinabi nating physical changes ito yung
changes due to growth, degeneration,
production and procreation. O changes about
biological transformation dahil dumadami,
lumalago or nagkakaroon ng harvest sa
biological asset. Sa pag rerecord ng physical
changes new age at new price less old age at
new price + fair value less costs to sell of new
born at date of birth. Kapag sinabi namang price
change ito yung price changes sa market dahil
sa kakulangan ng supply, pagtaas ng demand or
controlled by government. Ang computation ng
price change ay New price at old age less old
price at old age.
PRESENTATION AND DISCLOSURE
 In the statement of financial position, biological
assets should be classified as a separate class of
assets falling under neither current or non-current
classifications.
 Reflects the views of such assets as having an
unlimited life on a collective basis; it is the total
exposure of the entity to this type of asset that is
important. 
- If a produce growing in a plant that is yet to be
from the reporting period before they are ready
for harvest it is NON CURRENT. For example, If
yung mga bunga that is still attached to the
trees and takes 12 months to harvest it is
considered non current. If it will be harvested
12 months or less it is considered current .
Other examples is if yung mga livestock or
chicken are held for breeding purposes only
which means it will not be sold, it is part of total
 non current assets. But if these livestocks are
held for slaughter purposes, it is current.
Inshort, for breeding, non current, for slaughter,
current assets.

AGRICULTURAL PRODUCE AT THE POINT OF HARVEST

 Should be measured at fair value at the point of

harvest and this amount is deemed cost for
application of IAS 2 to consequential inventories.

 Harvested product of an entity’s biological assets.

- Pagkapitas sa puno o the moment na hinarvest

mo yung agricultural produce ang standard
muna ay IAS 41(agriculture). After harvest hindi
na sya agricultural produce siya ay recognized
na IAS 2 which is inventory.

MEASUREMENT AND PRESENTATION

 The IAS states that agriculture produce should be

measures at each year end at fair value less
estimated point-of-sale costs, to the extent that it is
sourced from an entity’s biological assets, which are
also valued at fair value.

- Kasi until harvest ang agricultural produce ay

valued at fair value as part of biological assets

 The change in carrying amount of the agriculture

produce held at year end should be recognized as
income or expense in profit or loss.

PRESENTATION IN THE STATEMENT OF FINNANCIAL

POSITION

Agricultural Produce should be classified as inventory in

the statement of financial position and disclosed
separately either in the statement of financial position
or in the notes.

- Ito ay dahil ang agricultural produce after

harvest ay I rerercognize as IAS 2 (inventory)
kasi magiging raw material na sya o ibebenta na
ang produce.

GOVERNMENT GRANTS

 An unconditional government grant related a

biological asset measured at its fair value less
estimated point-of-scale costs should be recognized
as income when, and only when, the grant becomes
receivable.

- UNCONDITIONAL meaning walang condition,

you own the biological asset. At I rerecognized
lang ito kapag o kung kelan ito receivable o sure
na you own the biological asset.

 An entity should only recognize the grant as income

when, and only when, the conditions are met.

- Kung conditional naman the biological asset is

still not recognized. It will be recognized when
the conditions are met.