| agri Chapter 29 Agriculture gasted stendard: PAS 41 Agricuting fearning Objectives Differentiate the following: biological agricultural produce and ivenoae assets, bearer plants, 2, State the initial and subsequent meas i an assets and agricultural produce, surement of biological 3. Account for government grants that are within the scope of PAS 41, Introduction Agriculture means farming or the Process of producing crops and nising livestock. PAS 41 prescribes the accounting and disclosures for agricultural and related activity. PAS 41 applies to the following when they relate to ‘gricultural activity: 2. Biological assets, except bearer plants; 4. Agricultural produce at the point of harvest; and & Unconditional government grants related to a biological asset measured at its fair value less costs to sell AS 41 does not apply to the following: Land related to agricultural activity (PAS 16 and PAS 40). ‘. Bearer plarits (PAS 16). However, PAS 41 applies to the Produce on those bearer plants. © Government grants related to bearer plants (PAS 20) & Intangible assets related to agricultural activity (PAS38). PAS 41 applies to agricultural produce only at the pot of est, After harvest, PAS 2 Inventories or other applicable “dard is applied,Biological asset Biological asset is “a living animal or plant.” (PAs 41.5) “Bio” means life. Therefore, dead animals, dead plants . other non-living things cannot qualify as biological assets, nd Biological assets can be either: a. Consumable biological assets - “those that are to be harvested a, agricultural produce or sold as biological assets.” (PAS 414, Examples: " i. livestock intended for the production of meat livestock held for sale . fish in farms iv, crops such as maize and wheat vy. _ produce ona bearer plant vi. trees being’ grown for lumber (PAS 41.44) b. Bearer biological assets - those that are held to bear produce, Only the produce is harvested while the bearer biological ass remains. Examples: i. _ livestock from which milk is produced ii, fruit trees from which fruit is harvested (PAS 41.44) Living animals, whether consumable or bearer, a" classified as biological assets if they relate to agricultural activin. However, living plants are classified as biological assets only they are consumable. Bearer plants are classified as PPE. Bearer plant is “a living plant that: a. isused in the production or supply of agricultural produce: b. is expected to bear produce for more than one period: and c._ has a remote likelihood of being sold as agricultural proau” except for incidental scrap sales.” (PAS 41.5) Plants that are to be harvested as agricultural produce not bearer plants. For example, a tree that is intended '© heegree ae | ~_ Te | 2 d used as lumber ; Jott a bi mber is a co ified as biologica} "sumable pl ae the feiioee fe Sset. A tree that is cenacang aemee atm nd therefore coe a hile the tee remain ee att, _ Classified as Property, pl e ue is a bearer arer plants th. / plant and equipment. are not necessaril at may be sold aS scrap Whee 5 ysed 'Y Precluded from being classifi nae 8 a sified as bearer and therefore classified as biological as, ; ‘set. Examples: peanut, rice, i Sugarcane, aba banana, garlic, onion, aes cabbage, carrots, ©. Only plants that bear produce repeatedly over a long period of time are considered bearer plants (PPE). (Q Remember the following: Items i Applicable standard Bearer and Consumable animals _ PAS 41 1+ Consumable plants PAS 41 PASEO St PAS 41 |e Produce growing on bearer plants Agricultural produce Agricultural produce is “the harvested produce of the entity's biological assets.” (PAS 41.5) pe Harvest is “the detachment of produce from a biological asset or the cessation of a biological asset's life processes.” (PAs 41.5) Agricultural produce refers to those that are in their matural state and are not yet processed. Those that are already subjected to processing are treated as inventories.324 i et Cha ——~ Shapie,. Rey Se Apple fruits growing on gy biological asset (PAs 4," ee I t ‘Apple tree- bearer plant (held | [ Harvested apple— Apple pie ~ subjecied ‘tw dear produce), accounted for | | agrinutural produce, rovessing, accounted for snnder PAS 16 PPE. accounted for under PAS | | under PAS? Imevios, $i the point of harvest. | © PAS 41.5C states that “Produce growing on bearer plants is a biologial assei.” However, in many cases, itis impractical to account for fruits growing on trees before they are harvested. Many companies, therefore, start to apply PAS 41 on the fruits only at the point of harvest. This is also true for produce of animals, eg, milk is accounted for only after it is squeezed from the cows breast. @ £2 Remember the followin Nature of asset Type of asset * Living animal or plant Biological asset (PAS 41) However, bearer plants at classified as PPE (PAS 16) ‘* Unprocessed harvested Agricultural produce (PAS#) produce Ls_ Processed product | :wicultere y SOs table below shows examp! pxauded from the scope of PAS 41: Agricultural Produce at point of harvest Bearer Plants 'Ples of items that are included and Products that are the result of processing after harvest (PAS 16 PPE) {PAS 41) _| Wool (PAS 2 Inventories) _| Yarn, carpet | Felled trees Logs, lumber {Milk | Cheese Sausages, cured i | Thread, clothing Sugar | Cured tobacco | Carcass _| Harvested cotton _| Harvested cane Picked leaves Picked leaves Picked fruit | Rubber trees_| Harvested latex Rubber products pasa) Agricuttural activity Biological assets and agricultural produce are accounted for under PAS 41 only when they relate to agricultural activity. Those that do not relate to agricultural activity are accounted for under other 2pplicable Standards, For example, plants used in landscaping are ‘0! biological assets but rather land improvements (i.e,, PPE). Agricultural activity is “the management by an entity of the biological transformation and harvest of biological assets for sale " for conversion into agricultural produce or into additional iologi 7m eereaneleg of aguicltural activities indude: rising Westock, forestry, annual or perennial cropping, cultivating All rights belongs to respective authors fe sen ee SESS as i :326 i Rey orchards and plantations, floriculture, and aquaculture (inclug fish farming). (PAS 41.5) nig The following are the common features of agricul, activities: Al a. Capability to change — living animals and plants are capaby, biological transformation; ¢ b. Management of change — management facilitates biology transformation by enhancing, or at least stabilizing, Condition, necessary for the process to take place. Such Management distinguishes agricultural activity from other activities, 5, example, harvesting from unmanaged sources (such as ocean fishing and deforestation) is not agricultural activity; and ¢. Measurenient of change - the change in quality or quanity brought about by biological transformation or harvest is measured and monitored as a routine management function, (PAS 41.6) Biological Transformation — comprises the following processes that cause qualitative or quantitative changes in a biological asset: I. Asset changes through: a. Growth ~ is an increase in quantity or improvement in quality of an animal or plant. b. Procreation — is the creation of additional living, animals or plants. ©. Degeneration - is a decrease in the quantity oF deterioration in quality of an animal or plant. Il, Production of agricultural produce. Recognition i A biological asset or agricultural produce is recognized when i meets the asset recognition criteria, including the reli measurement of its fair value or cost.grout gO a easurement Bit iological assets 3 jcal assets are initi, iologic' tially an que less costs to sell. Th . Subsequently measured at fair of surement and subseque ¢ gain or loss arising from initial cs cael ‘nt changes in fair value less costs t Sit are recognized in profit or loss = A gain may arise on the i siti ¢ initial recognition of a biological aseet a ne When a calf is born. A loss may season the initial recognition of a biological asset because cosis to sell are deducted from fair value, eee assets whose fair value cannot be reliably determined on initial recognition are initially measured at cost and subsequently measured at cost less accumulated depreciation and accumulated impairment losses. Once the fair value becomes reliably measurable, the biological asset is measured at its fair value less costs to sell. A biological asset that is previously measured at fair value less costs to sell is continued to be measured at fair value less costs to sell until it is disposed of. Agricultural produce Agricultural produce, in all cases, is initially measured at fair nalue less costs to sell at the point of harvest. This will be the deemed cost for subsequent accounting using PAS 2 or another applicable Standard. The gain or loss arising from the initial measurement is recognized in profit or Toss. that would be received to sell an asset ty in an orderly transaction between date.” (PAS41.8) directly attributable to nce costs and income > Fair value - is “the price or paid to transfer a liabilit market participants at the measurement Costs to sell - are the incremental costs the disposal of an asset, excluding fina taxes, (PAS 41.5) v Value Measurement when assets and agricultural RS 13 Fair An entity uses PF £ biological Measuring the fair value ©produce. Fair value measurement may be facilitated by pro,, biological assets or agricultural produce according to Signi’ attributes, such as age and quality. ‘ant Contract prices are not necessarily relevan, wl measuting fair value. Accordingly, fair value is not adjusteg the existence of a contract. y “Cost may sometimes approximate fair value, Particular when: 7 i. little biological transformation has taken place since initia, cost incurrence (e.g., seedlings planted immediately prio, to the end of a reporting period or newly acquired livestock), o ii. the impact of the biological transformation on price is no, expected to be material (e.g, the initial growth in a 30-year pine tree plantation production cycle).” (PAS 41.24) Cash flows on finance costs, taxes, and costs of reestablishing biological assets after harvest (e.g., the cost of replanting after harvest) are not considered when measuring fair value. Costs to sell include the following: a. Commissions to brokers b. Levies by regulatory agencies and commodity exchanges c. Transfer taxes and duties Costs to sell do not include transport costs, advertising costs, income taxes, and interest expense. é If location is a characteristic of the biological asset, the price in the principal (or most advantageous) market shall be adjusted for the transport costs. . Illustration 1: Measurement An entity has the following information: Price in the principal market 20,000 Commissions to brokers 1,000 Transport costs 700evies by commodity exchange sransfer taxes and duties 300 Advertising costs 500 200 yirements: Compute for the following: (a cel and (6) fait value less cost to sell ) fair value, (b) costs to solutions: price in the principal market Transport costs fair value Commissions to brokers Levies by commodity exchange Transfer taxes and duties Costs to sell 7,800 fair value 18300 Costs to sell (1,800) 17,500 Fair value less costs to sell Advertising costs are not incremental costs directly attributable to the sale of biological assets or agricultural produce. Accordingly, they are not considered in determining fair value less costs to sell. Ilustration 2: Fair value measurement sd Information on a biological asset of ABC Co. with a historical cost P10 is shown below: ive market Active mari 2 — 130 125 Market price ts to sell 15 Tansport costs 10Cha ge Si ‘The contract price for the biological asset is P90. Case #1: Principal market If “Active market #1” is the principal market for the asset, a, Wha, amount is the biological asset recognized in the year-end Financia) statements? Solution; Price in Active market #1 130 Transport costs (10) Fair value 120 Costs to sell (5) Fair value less costs to sell 105 Notice that both the historical cost and the contract price are ignored. Case #2: Most advantageous market If neither market is the principal market for the asset, at what amount is the biological asset recognized in the year-end financial statements? Solution: In the absence of a principal market, the price in ‘the mot advantageous market for the asset shall be used. The most advantageous market is the market that maximizes the amount that would be received to sell the asset, after taking into account cos to sell and transport costs, The fe most advantageous market is determined as follows: a Active market #1 Active market ® Market price 130 125 + Costs to sell 5) Tr (15) _ Tansport costs 10 10) Amount received from sale 0 Sreeale willbe used in determining the f fair value of the asset. sureme i i she measurement of the biological asset is determined as follows: price in Active market #2 105 transport costs 10 pair value i Costs to sell (5) fair value less costs to sell 110 —— > Active market is “a market in which transactions for the asset or liability take Place with sufficient frequency and volume to provide pricing information on an ongoing basis.” arns13.9) Ilustration 3: Loss on initial recognition of biological asset On January 1, 20x1, ABC Co, acquired a biological asset at its fair talue of P10,000. Necessary costs incurred on the purchase totaled 7,000. It was estimated that if the biological asset is to be sold currently, costs to sell would amount to P500. The biological asset is initially recognized as follows: [Jat, | Biological asset (10,000 ~ 500)" 9,500 | ™1 | Loss from change in FVLCS 2,500 | Cash (10,000 + 2,000) 12,000 “Fair value of P10,000 less costs to sell ‘of P500 = 99,500. The loss from change in fair value less cost to sell (FVLCS) istecognized in profit or loss. Uustration 4: Gain on initial recognition of biological asset On August 1, 20x1, a dairy catl fair value less cost to sell of anew a is 5,000. Costs incurred to induce p’ Je of ABC Co. gave birth to a calf. ly born calf as of August 1, ocreation such as costs» : Cha 2 PA 2 SB of artificial insemination, costs of labor and cesarean birt} totateg 73,000. The newly born biological asset is initially reco, nied 28 flows Aug.1. | Biological asset 000 = Gain from change in FVLCS. The biological asset is recognized at fair value less cog, sell. The other necessary costs are expensed when incurred, Ilhistration 5: Gain on initial recognition of agricultural Produce On April 1, 20x1, ABC Co. harvested ripe mangoes. The harvesteg mangoes have fair value less costs to sell of ?50,000 on April 1, 20x1. Labor costs incurred in the harvest totaled P5,000. ‘The agricultural produce is initially recognized as follows: Apr, | Inventory 50,000 ] es FVLCS of agricultural produce 50,000 | The harvest cost is expensed immediately. Subsequently, the inventory is measured at Lower of cost or NRV under PAS 2. Illustratipn 6: Changes in fair value less cost to sell | On January 1, 20x1, the biological assets of ABC Co. consist of ten 2 year old animals with fair value less cost to sell of 10,000 each for a total of P100,000. Transactions during the year include the following: * One animal aged 25 years was purchased on July 1, 20x1 for 10,800. ® One animal was born on July 1, 20x1, * No animals were sold or disposed of during the period. Per-unit fair values less costs to sell are as follows:ure me i animal at July 1, 20.1 7,000 Near old animal at July 1, 29,7 10,800 15Y animal at 31 December 20x1 7.200 N gear old animal at 31 December 20x1 8,000 (5 rold animal at 31 December 20s, 10,500 jpyear old animal at 31 December 20x 11,100 et old animal at 31 December 20x1 12,000 speontry to record the purchase of biol x logical asset is as follows: ‘ait | Biological assets 70,800 | anst Cash 10,800 ‘heentty torecognize the newly bom animal is as follows: pit | Biological assets 7,000 oa Gain from change in FVLCS 7,000 ALCS on December 31, 20x1: Tenanimals from Jan. 1, 20x1 now 3 years old each (10x P12,000) P 120,000 Oreanimal purchased on July 1, 20x1 now 3 years old (ixP12,000) 12,000 Sreanimal born on July 1, 20x1 now 05 year old ‘(Ix P8,000) 8,000 MVLCS - December 31, 20x1 140,000 Curying amount on December 31, 20x1 before year-end adjustment ing amount on January 1, 20x1 100,000 animal purchased on July 1, 20x1 “10,800 animal born on July 1, 20x1 —2.000 ‘ng amount on December 31, 20x1 More year-end adjustment liza00 \editional Sain from change in FVLCS (ri40,000- 117,800) _22.200 ‘eta in FVECS ig recognized as follows: | ay” Biological assets 22,200 Gain from change in FVLCS All rights belongs to respective authors » SealsON ee) era) The total gain from change in FVLCS in 20x1 is analyreg ‘ follows: Gain from FVLCS of new born animal - 7/1/x1 7,000 Gain from change in FVLCS - 12/31/x1 — 22.209 Total gain from change in FVLCS int 20*1 209 Alternative solution: Total gain from change in FVLCS in 20x1 FVLCS, end. 140.0% Carrying amount, excluding new ‘born - Beginning of the period 100,000 «Increase due to purchase 10800 ___ 11080 is in FVLCS Total gain from change in 29,200 Biological assets attached to land Biological assets attached to land (e.g,, trees ina plantation forest) may not have a separate market but an active market may exist for the combined assets (ie., biological assets, raw land, and land improvements) as a package. In such case, the fair value of the raw land and land improvements may be deducted from the fair value of the combined assets to arrive at the fair value of the biological assets. Illustration: ABC Co. has the following assets as of December 31, 20x1: Land held as plantation 300,000 120,000 Trees (planted on the land referred to above) ‘The combined market value of the assets is ?500,000, while the market value of the land is P320,000, 10% of which is attributable to improvements on the land. The fair value of the biological asset (Le,, trees) is determined follows: A LTT Nos Sco eaeactre _ ss Pi 335 axbined market value of land and trees value of land including land i 500,000 g value of Tan 18 land im; vt gatue attributable to trees * “e™eM (320.000) - 180,000 The agricultural land is ac equipment under PAS 16,0 fF as property, plant, and government Grants only government Grants that are related to biological assets seesured at fair value less costs to sell are accounted for andes PAS 4 Those that are related to biological assets measured at cost less cumulated depreciation and accumulated impairment losses are counted for under PAS 20 Accounting for Government Grants and Disclosure of Government Assistance. Under PAS 41, if the government grant is: 1. Unconditional ~ the grant is recognized in profit or loss when it becomes receivable. . Conditional — the grant is recognized in profit or loss when the attached conditions are met. Conditional but the terms of the grant allow part of it to be retained according to the time that has elapsed - a portion of the grant is tecognized in profit or loss as time passes (e.g., on a straight- line basis). . Uustration 1: Unconditional government grant Oh January 1, 20x1, the government granted ABC Co. P100,000 &h as aid in financing the domestication of ostriches. The Sttches are raised to produce eggs which are sold to the Sumunity. ABC measures its biological assets at fair value less Sstto sell. No conditions are attached to the grant. iement: How much is the income from government grant in 1? ‘oer 160,000. aBS ac el Ss Ste Illustration 2: Conditional government grant On December 1, 20x1, ABC Co. received P100,000 cash from, government to be used in planting com. Com plant, a considered “annual crops” and therefore are not bearer ti The grant becomes receivable when ABC acquires a suitable ee plant the corn. As of December 31, 20x1, ABC has yet to comp) with the condition. t le Requirement: How much is the income from government grant in 20x1? Answer: Q. The attached condition is not yet met. Illustration 3.1: Conditional government grant In 20x1, the government granted ABC Co. a 3-hectare land to plant potatoes. Potato plants are not considered bearer plants. The land has a fair value of P500,000. The grant requires ABC to farm only within the city limits for five years. If any of the conditions is breached, ABC is required to return the entire grant. a. How much income from government grant is recognized in 20x1? ‘Answer: 0, The five-year restriction has not yet lapsed. b. How much income from government grant is recognized i" 20x6, after the 5-year restriction has lapsed? Answer? 500,000 (assuming the fair value is still 7500000) ™ condition is now met because the 5-year restriction has lapsed Illustration 3.2: Part of grant retained due to passage of time On January 1, 20x1, the government granted ABC Co- a0 fl cash as aid in planting rice. Rice plants are considered “ar crops” and therefore do not qualify as bearer plants. The en buving the Re Tee eon os ee Fue copyagriculture = TO 337 sires ABC to farm only within t a of the conditions is breached aking into consideration the portion ime may limits for five years. If ae must return the grant Tetained based on passage of Assuming no breach of " a condition, how % i = y much inet fi government tant is recognized in 20x17 ome from answer: 100,000 (500,000 + 5 years). | ; posses using the straight-line =o is recognized as time », Assuming no breach of condition, how much income from government grant is recognized in 20x2? | Answer: 100,000 (500,000 + 5 years). Encouraged disclosures Disclosure of the following information is encouraged but not required: |. Disclosure of consumable and bearer biological assets. 1. Disclosure of mature and immature biological assets. > Mature biological assets — are “those that have attained (for consumable biological harvestable specifications assets) or are able to sustain regular harvests (for bearer biological assets).” (PAS 41.45) 1 Disdosure of breakdown of total “Gain (loss) from changes FVLCS” during the period attributable to price change and Physical change * / Separate disclosure of physical and price changes is 4seful in appraising curtent period performance and future Prospects, particularly when there is a production cycle of more ‘han one year.Chapte This information is generally less useful when the production cycle is less than one year (for example, when raising chickens or growing cereal crops). > Due to price change pertains to the difference between pricg, at the beginning and end of the period without Considerin, changes in price due to physical growth of biological assets Age of biological asset at the end of the period is ignored. Formula: Due to price change (FYLCS, beg. Age as of be; > Due to physical change pertains to the difference between prices at the end of the period considering changes in price due to physical growth. EVLCS at the beginning of the period is ignored. Formula: Due to physical change (FVLCS, end. Age as of end.) - (FVLCS, end. Age as of beg.) x Qty. + FVLCS of newborn at date of birth Reconciliation: Change in FVLCS due to price change x Change in FVLCS due to physical change xx Total gain (loss) on change in FVLCS xx, Illustration: Change in FVLCS due to Price & physical changes On January 1, 20x, the biological assets of ABC Co. consist of ter -?-Year old animals with fair value less cost to sell of P10,000 each for a total of P100,000, : Transactions during the year include the following:339 ore animal aged 2.5 years was purchased on July 1, 20x1 for 00. 110" imal was born on July 1, 0x1 * yoarimals were sold or disposed of during the period. ‘ nit fair values less costs to sell are as follows: porn animal at July 1, 20x1 P7,000 goyear old animal at July 1, 20x1 10,800 newborn animal at 31 December 20x1 7,200 6 year old animal at 31 December 20x1 8,000 zyear old animal at 31 December 20x1 10,500 gsyear old animal at 31 December 20x1 11,100 syear old animal at 31 December 20x1 12,000 fequitements: Compute for the following: 2 Total gain (loss) from change in FVLCS 8 Change in FVLCS due to price change ¢ Change in FVLCS due to physical change. ‘Solutions: | lequirement (a): Total gain (loss) from changes in FVLCS: ALCS, end. 140,000 Gnying amount, excluding new born “Beginning of the period 100,000 ‘Increase due to purchase 10,800 110,800 "otal gain from change in FVLCS 29,200 *ehuinement (b): Change in FVLCS attributable to price changeB00 ———Sereray (FVLCS, end, Ageas of beg.) - (FVLCS, beg. Age as of beg.) x Quy, FVLCS of a2 yr. aid on Deo. 31 LTen sheet begining of the period: (10,500 - 10,000) x 10 "5,000 TI, One animal purchased during the period (811,100 - P10,800) x 1 300 TIL One animal born during the period (27,200 - P7,000) x1 200 Change in FVLCS attributable to PRICE CHANGE __ 550 Requirement (c): Change in FVLCS attributable to physical change (EVLCS, end. Age as of end.) - (FVLCS, end. Age as of beg.) x Qly. + FVLCS of newborm at date of birth (12,000 - 10,500) x 10 P 15,000 IL. One animal purchased during thé period (P12,000 - P11,100) x 1 900 ILL One animal born during the period (8,000 - P7,200) x1 800 B FVLCS of newborn at date of birth "7,000 Change in FVLCS attributable to physical change 23,700nciliation: gein FVLCS due to price change 5,500 gen FVLCS due to physical change 23,700 5 tal gain (loss) on change in FVLCS ~p29,200_ Financial statement presentation iological assets are aggregated and presented in the statement of financial position under the line item “Biological assets.” Biological assets are normally classified as noncurrent assets. The breakdown of the line item is disclosed in the notes. After the point of harvest, agricultural produce are presented, under “Inventories” and are classified as current assets. An entity discloses the aggregate gain or loss arising on initial recognition of biological assets and agricultural produce and from the change in fair value less costs to sell of biological assets.Chap I te E20 _Chapter 20: Summary _____________ » Biological asset is a living animal or plant a; + Agricultural produce are harvested products from biologic, assets before any processing. ; | * Harvesting from unmanaged sources is not agticultura | activity. * Biological assets and agricultural produce are recognize when the following are present: (a) control; (b) probable futur | economic benefits; and (©) fair value or cost can be measureg reliably. © Biological asset is initially and subsequently measured at fair | value less costs to sell. «Agricultural produce is initially measured at fair value less costs to sell at the point of harvest and subsequently measured under PAS 2 Inventories or other applicable standard. Costs to sell include (a) commissions to brokers, (b) levies by regulatory agencies and commodity exchanges, and (q transfer taxes and duties. | «Transport cosis are not costs to sell; they are deducted from the market price when measuring fair value. * Gains and losses from changes in FVLCS of biological assets and FVLCS of agricultural produce at the point of harvest ar | recognized in profit or loss. © If the fair value cannot be measured reliably on initit! “recognition, the biological asset is measured at cost les accumulated depreciation and accumulated impairment loss. ¢ Land used in agricultural activity is classified as PPE. * An unconditional government grant related to a piologictl asset measured at FVLCS is recognized in profit or loss wh" the government grant becomes receivabl puget eer n nr au crewsr gricultre ——— 343 pROBLEMS: OBLEM 1: TRUE OR FALSE PAS 41 Agriculture applies to al bearer plants. 3, PAS 41 Agriculture applies to a, int of harvest. 4, PAS 41 Agriculture does not agricultural produce, apply to land used in growing 5. AB roduce is harvested iologi eocet BARREN iene: product from a biological ¢ PAS4I applies to both consumable and bearer plants. Io Agricultural productivity is the management by an entity of the biological transformation of biological assets for sale, into agricultural produce, or into additional biological assets. 8 According to PAS 41, biological assets are measured at the lower of carrying amount and fair value less costs to sell. 9, According to PAS 41, agricultural produce are initially and subsequently measured at fair value less costs to sell. 40. Costs to sell are the incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxes but including transport costs. r ake i ll biological assets, including gticultural produce after the PROBLEM 2: FOR CLASSROOM DISCUSSION Scope and definitions ; 1. PAS 41 Agriculture is applicable to which of the following? a. Agricultural produce after the point of harvest b. Bearer plants related to agricultural activity ¢. Living animals related to agricultural activity 4. Unconditional government grants related to biological assets measured at cost : ich of low! is most likely icable to hich ang standard is most likely applical f the following _ ae SS. ae ihep ¢, PAS 2 Inventories . PAS 41 Agricul344 Chapter, i. | b. PAS 16 Property, Plant and Equipment —d. Any of these 3. PAS41 isapplicable to which of the following items? a. Land used for farming b. Agricultural produce after point of harvest c. Unconditional government grant related to bearer lars 4. Unconditional government grant related to consumay, living animals measured at fair value less costs to sel] 4. Which of the following is considered as a biological assy under PAS 41? a. Carcass c. Pig b. Ham d. Piggy bank 5. Which of the following is considered as an agricultural produce under PAS 41? a. eggs to be hatched into chicks ©. dairy cow b. condensed milk d. felled trees 6. Which of the following is considered as inventory to be accounted for under PAS 2? a, Harvested cotton «Tea b. Harvested cane d. Picked leaves Use the following information for the next three questions: ABC Co. has the following assets, Maize plants 40,000 Wool 6,000 Processed fruit 20,000 Logs 60,000 ‘Trees in a timber plantation 200,000 Grape vines 120,000 Cotton plants 20,000 Picked fruit 20,000 Harvested latex 30,000 Roasted peanuts _20,000How much is classified as pi 1 as biolo, for under PAS 41 Agriculture? a, 156,000 p. 206,000 Bical assets that are accounted . 260,000 . 100,000 his classifi 3. How mud ssified as prope ty, pl | ounted f , plant and equipment that are accounted for under PAS 16 Property, Plant and Equipment? a. 120,000 ¢. 140,000 p. 160,000 d e 9, How much is classified as agricultural produce? a. 6,000 56,000 b. 36,000 . 76,000 10, How much is classified as inventory? ‘a. 100,000 . 130,000 b. 106,000 i. 150,000 11. Which of the following is considered a bearer plant to be accounted for under PAS 16? c Vegetable oil a. Palm oil b. Com oil 4. Oil palm 12. Which of the following is considered an agricultural activity under PAS 41? a a. fishing in the open seas ¢ floriculture b. inegal neg d. farming in the cellphone 1B. PAS 41 is applicable to which of the following? s used for beautification a. expensive plant: i b. living animal used as transpor' tation vel executive © fishes in the fishpond being grown to be sold to consumers d. all of these hicle by a companySha Rey Measurement 14. Biological assets are measured as follows Initial Subsequent a. cost fair value less costs tg sell b. fair value fair value ©. fair value lower of cost and fair value less costs tog d. fair value less costs to sell fair value less costs tos 15. Which of the following is most likely an acceptabi, measurement for agricultural produce Initial Subsequent a. fair value less costs to sell cost b. fair value less costs to sell lower of cost and NRV c. fair value lower of cost and fair value less costs to sell d. fair value less costs to sell fair value less costs to sell 16. ABC Cos biological asset has fair value less costs to sell of 100,000 and P120,000 at the beginning and end of the period respectively. The year-end adjusting entry will most likely include a. a credit to unrealized gain of P20,000 to be recognized in profit or loss b. a credit to unrealized gain of P20,000 to be recognized in other comprehensive income c. a debit to unrealized gain of P20,000 to be recognized it profit or loss : d. none of these Government grants io 17. During 20x1, ABC Co. received a piece of land from a government, The land shall be used for farming annual °F measured at fair value less costs to sell. As of December 20x1, ABC Co. has not yet complied with the cond! attached to the grant. Which of the following is the accounting treatment for the grant?jeulture : 347 oo Credit the grant at fair med cles value less costs to sell and set up a p. Debit the grant at fair value le: hbility forthe same arouse, ane ee * Debit the grant at fair valu ie less s income for the same amount, costs to sell and credit g. None of these, only a memorandum entty shall be made. a Gs pisclosure 4g, On January 1, 20x1, ABC Co. has one, 1-year old, animal with carrying amount of P1,000. On March 31, ABC Co. acquired another animal, aged 2.25 years old, for P2,000, the fair value Jess costs of the animal on this date. One animal was born on October 1, 20x1. The fair value less costs to sell of the newborn animal on this date is P500. ABC Co. determined the following fair values less costs to sell on December 31, 20x1: New bormn..eseerereerees 25 year old. year old . 2 years old... 2.25 years old. 3 years old te for the following: Requirements: Comput ; ; 1 Total gain (oss) from the change in FVLCS during the period. » Change in FVLCS due to price change & Change in FVLCS due to physical change.6, | PROBLEM 3: EXERCISES 1. Road Co. has the following assets a8 at the rept (stated at fair values less costs to sell): 78 day yLand used to grow agricultural crops joy Herd of cattle grown to be butchered for their meat eed Fruit trees grown to produce fruits for sale y Rice plants grown to produce rice for sale [Les Requirement: How much is the total biological ASSES to bp accounted for under PAS 41? 2. Steele Co. has the following assets: Coffee plants tik 100,04 Harvested coffee beans 4\? om Harvested mangoes 4 a on Timber trees 9] oom Mango trees [Nh 300,00) Felled trees ~ »\8 - :. 30q00 Wooden furniture ‘puntos, -* PPE ogee Requirements: Compute for the amounts of the following: i, Biological asset ii, Agricultural produce Property, plant and equipment Inventory 3. Sound Co, has the following assets: Maize plants #!* coo Rubber trees -Pt soo Rubber shoes tet mi Harvested latex ~ (|) 00 a0 Palm oil 7. 800 f Oil palms v6 mt Com oil buving Ie All rights belongs to respective < uthorsr agricul st SO ble oil etal 200,000 poy 400,000 -3 irements: Compute for the a, e Biological asset Agricultural produce Property, plant and equipment Inventory | | | Mounts of the following: | it. iii. 4, At beginning of the period, Tri total fair value less costs to sell period, the fair value less costs to sell increased to P1,500,000. There were no increases or decreases in the number of biological assets during the year, iP Co.'s biological assets have a Of P1,300,000. At the end of the Requirement: Provide the year-end adjusting entry. PROBLEM 4; CLASSROOM ACTIVITY INSTRUCTIONS: . Find a study partner, preferably a smart one. 2 Imagine that you and your study partner are accountants. 3. Discuss and answer the requirements below. You and your Partner will be graded as one. | Requirements: |* Enumerate the items that are within the scope of PAS 41, » Differentiate the following: biological asset, agricultural Produce, plant that is classified as property, plant and °quipment, and inventory. Plain the accounting for biological assets. State any q. <*eptions. ; xplain the accounting for agricultural produce at the point of "Vest and after the harvest. BesoN 3500 Chater 3g era PROBLEM 5: MULTIPLE CHOICE - THEORY 1. Which of the following may be classified as a biological asset» a. breast milk ¢, mama monkey b. cheese curls d. dead mama monkey 2. Which of the following may be classified as an agricultura produce? a. duck c. egg powder b. table egg d. cake 3. Which of the following is not one of the common features of agricultural activities a. accounting change c. management of change b. capability to change d. measurement of change 4. A biological asset is initially and subsequently measured at a. fair value ©. cost b- fair value less costs to sell. fair value less costs to complete 5, Which of the following is not a biological asset that is accounted for under PAS 41 Agriculture? | a. animals that are being grown to be butchered for theit meat b. animals held to produce milk ¢. plants grown to produce fruit over a long period of time d. plants grown to be harvested and sold 6. The common features of agricultural activities include all of the following except : a. capability to change ¢. measurement of change b. management of change d. wind of change 7, Biological assets and agricultural produce are recognize! when all of the following are present except a. control| gle eo ome ,, probable future economi probable future event J, fair value oF cost can be medsured rel bl ably ic benefits piological assets are initially and a a. cost. p. fair value less costs to sell, bsequently measured at ©. lower of aandb d. any of these , Which of the following is not j i 4 wording to PAS 41? included in costs to sell a. commissions to brokers p. levies by regulatory agencies and commodi od ¢ transfer taxes and duties, cal gd. transport costs 1, According to PAS 41, an unconditional government grant related to a biological asset measured at FVL.CS is recognized in a. profit or loss when the government grant is received. b. profit or loss when the government grant becomes receivable. other comprehensive income when the grant is received. din profit or loss over the period the grant is expected to reimburse any related expenses. 2 PROBLEM 6: MULTIPLE CHOICE - COMPUTATIONAL Lethe fllowoing information for the next four questions: Tefollowing information pertains to Madagascar Co, 500,000 Wool 6,000 \ubber products 40,000 Thread in Teesin a timber plantation 95,000 Felled trees SAO ‘ize plants 40,000 Clothing 150,000 “mnber 62,000 Milk 9000 Yh 200,00 Carcass Ae “ed peanuts 20,000 Sugar 7i, | 352 ———herter ay Cotton plants 10,000 Harvested cotton 13,000 Peanut plants 5,000 Harvested peanuts 140009 Sugarcane 25,000 Harvested cane 22,009 Tobacco plants 45,000 Picked leaves 3,000 Tea bushes 800,000 Oil palms 300009 Dairy cattle 1,000,000 Picked grapes 2,009 Fruit trees 600,000 Picked fruit 10,000 Tea 43,000 Grape vines 2,000,000 Rubber trees 300,000 Harvested latex 10,000 Yarn 22,000 Cured tobacco 320,000 Carpet . 33,000 Wine 500,000 Logs 45,000 Processed fruit 20,000 Wheat plants 60,000 Palm oil 50,000 Cheese 75,000 Bean plants 20,000 Sausages 88,000 Cured hams 92,000 1. How much is classified as biological assets that are accounted for under PAS 41 Agriculture? a. 2,660,000 b. 2,000,000 —_¢. 6,000,000 d. 2,250,000 2. How much is classified as property, plant and equipment that are accounted for under PAS 16 Property, Plant and Equipment? a. 4,000,000 b. 4,860,000. 4,560,000 d. 3,650,000 3. How much is classified as agricultural produce? a. 230,000 b.248,000 «290,000. 250,000 4, How much is classified as inventory? a. 1,480,000 b. 1,580,000 ¢.1,600,000 1,880,000 5. Aherd of 5 four year old animals was held on 1 January 2007: On 1 July 2007 a 414 year old animal was purchased. The fat values less costs to sell were as follows: 4 year old animal at 1 January 2007 P200 4A year old animal at 1 July 2007 p212 5 year old animal at 31 December 2007 P230agree ee How much is the gain to be r i tN sbi 00 ee from the change in fair "168 «#172 1 a ©. 184 d. None of these owing informatiy etehl ation for then i toe te = three questions: of P3,000 on January 1, 20x1, On Ma jrimal on this date is P500, ABC Co. determined the following fair vali Me erat oe '§ fair values less costs to sell on New born.. 25 year old lyear old . 2 years old. 2.25 years old... 3 years old. 6. How much is the total gain (loss) from the change in FVLCS during the period? a 4,000 ¢. 12,000 b. 9,000 . 18,000 7. How much is the change in FVLCS due to price change? a 1,800 3,000 b. 2,800 4. 3,200 8. How much is the change in FVLCS due to physical change? & 8,800 ©. 9,200 ». 9.000 d. 10,200