CHAPTER 5 BIOLOGICAL ASSETS Intended Learning Outcomes ‘ apervating tis chapter, you sult be abe to | 4, describe the nature of biolagical assets, Gearer plants, and | agricultural prodiuce. 2, measure biological assets upon inital recognition and after initial recognition; 4. measure agricultural prodice upon intial recognition; 14. identify required disclosures related to biological assets and | agricultural produce troduction For quite some time, business companies engaged in agriculture toi been at @ loss on how they would report financial information. The ‘Brsmpment of a set of accounting standards that specifically addresses the ceemation needs of agricultural companies is a proof that, the accounting Mesion considers the uniqueness of the operations of particular industries. IAS 41, Agriculture, prescribes the accounting treatment, financial gaiement presentation, and disclosures related to agricultural activity. Ste Standard applies only to biological assets and their biological tusformation and to agricultural produce at the point of harvest. After hunest of agricultural produce, the applicable accounting standard that ipverns its measurement and reporting is IAS 2, Inventories. TAS 41 does not deal with accounting for bearer plants. Bearer ants are within the scope of IAS 16 Property, Plant and Equipment. However, this chapter deals with the discussion of bearer plants as it slates to agriculture,Chapter 5 ~ Biological Assets ASSETS, NATURE OF BIOLOGICAL AGRICULTURAL PRODUCE, and BEARER PLANTS tor animal. Examples of biolog, plants, dairy cattle, #4 A biological asset is a living plan! i » Di assets are sheep, trees in & plantation forest, bushes, vines and fruit trees. the harvested product of the entity, he agricultural produce from sheep, jot and milk is the agriculye Agricultural produce is biological assets. Thus, wool is t are the agricultural produce from trees, produce from dairy cattle. In thiw picture, the mango tree is a bearer plant that under the Amended IAS 16 is classified as Property, Plant and Equipment. The dairy cattle are biological assets, while the mango fruits are the agricultural produce. As defined in IAS 16 Property, Plant and Equipment and IAS 41 Agriculture, a bearer plant is a living plant that ' (a) _ is used in the production or supply of agricultural produce; {b) is expected to bear produce for more than one period; (c) has a remote likelihood of being sold.as agricultural produce, except for incidental scrap sales, 272ter 5 ~ Biological Assets 4 on the given definition, IAS 41 in paragraph states that eee are not bearer plants Reree anh oh sae yew Plants cultivated to be harvested as agricultural produce (for (2) example, trees grown for use as lumber) (t _ Plants cultivated to produce agricultural produce when there is more than a remote likelihood that the entity will also harvest and sell the plant as agricultural produce, other than as incidental scrap sales (for example, trees that are cultivated both for their fruit and lumber) Annual crops. ‘All items above are classified as biological assets, rather than as plants because their growth leads to their conversion as agricultural produce: when bearer plants are no longer used to bear produce, they may cat down and sold as scrap, for example, for use as firewood. Such Kfental scrap sales would not prevent the plant from satisfving the ‘rion of a bearer plant (IAS 41, paragraph 5B) Bearer plants are included in the caption Property, Plant and squipment and are subject to the same measurement models applicable to overt, plant and equipment. AGRICULTURAL ACTIVITY Agricultural activity is the management by an entity of the biological transformation and harvest of biological assets for sale or for conversion into agricultural produce or into additional biological assets (IAS 41 reragraph 5). It covers a wide range of activities, such as raising livestock, fresty, annual or perennial cropping, cultivating orchards and slitations, floriculture and aquaculture. Common features cain be atserved, such as the following (IAS 41, paragraph 6}: Capability to change, arising from biological transformation; (6) Management of change, which facilitates biological transformation by enhancing or stabilizing conditions necessary for the process to take place; and brought about by biological (a) (9 Measurement of change, transformation or harvest. The processes of growth, degeneration, production, and procreation ha reeegtt8e qualitative or quantitative changes in biological assets are to by IAS 41 as biological transformation. Meanwhile, the 273Chapter 5 - Biological Assets bic from a detachment of produce wee so biological asset’s life process’ ASSETS ACCOUNTING FOR BIOLOGICAL set when th piological asset ° fay ‘An enterprise recognizes & i conditions are met: “ he enterprise controls the asset a8 @TeSUt Of Past eye, the enter (a) ‘ ble that the future economic benefits wily Ne {b) it is probat the entity; and Jiably, (6) the fair value or cost can be measured reliably, ini ue less is .d initially at fair val S estima ical asset is measure . i costo sl Parva the pre that sev sie on a oe in le ction in the pri st = oe ae map be directly observable or estimated Using g valuation technique. ‘The fair value of biological asset (or eae eee is nop adjusted by a contract with contract price) to sell ata future date, The value is based on the present condition of the bi cs eset at the measurement date. For the purpose of measuring the fait value g biological assets, they may be grouped and valued simultaneously baseq gx some attributes, say similarity in physical characteristics, or age of ie asset. Costs to sell are the incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxes (IAS 41, paragraph 5), A biological asset is initially recognized upon purchase or upon birth of an animal When a biological asset is purchased, it is initially recorded at its fair value less cost to sell. Gains and losses can arise on the initia recognition upon the purchase of a biological asset, as the fair value less cost to sell is likely to be more or less than the total purchase price plus transaction and transportation costs, Thus, assuming that an anim purchased and the purchase to sell, the pro-forma entry is al classified as biological asset is Price exceeds its fair value less estimated cost Biological Asset (PV iess cast to sell) Expense - Initial Recognition of Biological Asset Cash (purchase price and other cost) RE 274Chapter 5 ~ Biological Assets yen an animal is born, the newborn is classified as a biological (Mis considered as an income at its fair value less cost to sel att te entry 18 m0 iological Asset (FV less Cost to Sell) oo ‘Income ~ Change in FV of Biological Asset 2 1, biological asset acquired through an unconditional government jg recorded at its fair value less cost to sell, with a credit to an income gottit Nnen and only when the government grant becomes receivable. secon “government grant is conditional, the entity shall recognize the wen “jncome when and only when the conditions required by the grant ae {1as 41, paragraphs 34 and 35), we MEASUREMENT AFTER INITIAL RECOGNITION ‘a biological asset should be measured at each reporting date at its fair value Tess estimated cost to sell. When fair value is not directly ui rable, the following may be considered: the most recent market aegccon price; prices for similar assets after adjustment to reflect wgittrees in size, quality oF characteristics; any benchmark within the sect When market-determined prices or values are not available in its cesent condition, valuation techniques may be used, such as the present Bige of expected net cash flows from the asset discounted at current determined pretax rate. ‘All costs incurred during the period related to biological assets that are measured at fair value less estimated cost to sell are recognized in profit srs when incurred, except for the cost of purchase. Thus, labor costs feid to formers and material costs, such as cost of fertilizers, feeds, feerinarian’s professional fees and the like are récorded as expenses when incurred, ‘Any change in the fair value less costs to sell during a reporting period is, taken to profit or loss. IAS 41 encourages separate disclosures of change in fair value costs to sell due to price change and change in fair talue less costs to sell due to physical change, particularly when Production cycle is more than one year. 275Chapter § - Biological Assets alue less co, ange in the fair va a Tiologal assets during the reporting Sl ‘cluded in profit or loss, Dey cs is in me “January 1, 2019 FV less CTS = P25,000 12/31/19 entry Biological Assets - Cattle 10,000 Income - Change in ae FY of Biological Assets 10,009 a December $1, 2019 FV less CTS = P35,000 5.1 Disposition and Related Journal Entry Change in Fair Value less Costs to Sell of Biological Assets When fair value is not reliably determinable for a biological asse, and when alternative estimates of fair value are determined to 5 unreliable, the biological asset is measured in the statement of finanas, Position at cost less accumulated depreciation and accumulate, 'mpaizment losses. In such a case, all other biological assets of the enty still must be measured at fair value, If the fair value of the biological ass becomes reliably measurable in subsequent periods, the entity must swites to fair value less costs to sell measurement basis. be clear, Accounting Entries for Biological Assets For a complete illustration of transactions relating to biological assets, assume the following information for Monteclaire Farms: FV less cost to sell of biological assets at December 31, 2018 3,500,000 Biological assets purchased during 2019 Purchase price 4,000,000, FV less cost fo sell upon purchase 3,900,000 Income arising from change in fair value less cost to sell during 2019 due to (a) price changes 1,200,000 (0) physical changes 2,500,000 Sale of biological assets during 2019 4,200,000 276Chapter 5 - Biological Assets pe given information 8 recorded as follows: urchase of the biological assets: upon Pi ological Assets 3,900,000 eepense - Initial Recognition of Biological Assets 100,000 cash 4,000,000 ncrease in fair value less costs to sell during the period (inclusive Mr pirth of biological assets and change in fair value immediately prior to sale): jcai Assets Biolog come ~ Change in FV less eee Cost to Sell due to Price Change 1,200,000 Income - Change in FV less Cost to Sell due to Physical Change 2,500,000 gale of biological assets (Any change in fair value is assumed to ave been taken up in the above entry): cash 4,200,000 Biological Assets 4,200,000 In the notes to the financial statements, the disclosure of the ciliation of the changes in the carrying amounts of the ‘biological ‘ets during the period is presented as follows: Carrying amount, January 1, 2019 3,500,000 Increases due to purchases 3,900,000 Income - change in fair value less cost to sell duc to price change 1,200,000 Income - change in fair value less cost to sell due to physical change 2,500,000 Decreases due to sales (4,200,000) Carrying amount, December 31, 2019 6,900,000 Biological assets that are not expected to be disposed of within twelve months from the end of the reporting period are presented as part of ton-eurrent assets in the statement of financial position. The account ‘ome - change in fair value less cost to sell of biological assets is resented as revenue in the statement of comprehensive income, Disclosing Separately the Change in Fair Value due to Price Change ‘ad the Change in Fair Value due to Physical Change Changes ‘The fair value of biological assets can change due to both physical sand price changes in the market. IAS 41 encourages but does not 277Chapter 5 - Biological Assets nese two elements accounting for gp, of physical and price changes ig 4.8 in sonanee and future prospects, par !Yl in far IAS 41, paragraph 51)“, require separate disclosures of t fair value. Separate disclosure appraising current period perfor when production cycle is more than one Ye: any opts to disclose the two factors separatey, Rissuuen Sera iePeplit into two components, accordingly, Ys the Change in fair value due to price change is the increase or decrease jn price of the biological asset having the same characteristics at two differen, dates. For example, if a two-year old cattle had @ fair value less cost to sy of P25,000 on January 1, 2019 and a two-year old cattle having the sam, Size and charccteristics had a fair value less cost to sell of P28,009 4° December 31, 2019, then the gain arising from change in fair value due 4, price change during the year for that cattle is P3,000. The two-year oi cattle on January 1, 2019 is already three years old at December 31, 2919 If the fair value of a three year old cattle an December 31, 2019 is P35,999 the change in fair value less cost to sell due to physical change is P7,099, which is P35,000 - P28,000. The birth of an animal also gives rise to change in fair value due to physical change. For a complete illustration, consider the following: A herd of twenty 2 yearold animals was held on January 1, 2019, Five animals, aged 2.5 years old, were purchased on July 1, 2019. On the same date, 4 animals were born. Ten animals were sold at December 31, 2019, aged 3 years old, at fair value. Per unit fair values less estimated cost to sell were as follows: January 1, 2019 2 year-old animal 15,000 July 1, 2019 Newborn animal 8,000 2.5 year-old animal 20,000 December 31, 2019 Newborn animal 8,500 0.5 year-old animal 9,500 2 year-old animal 16,500 2.5 year-old animal 23,000 3 year-old animal 28,000 2019 ‘The following are the entries to record the foregoing transactions: July 1 Biological Assets 100,000 Cash 100,000 Purchased five 2.5-year old animals 2782year-ld cattle at January 1, 2019 -P25,000. Increase in FV less Cost to Sell due to Price Change = 3,000 2 year-old cattle at December 31, 2019 -P28,00 Increase in FV less Cost to Sell due to Physical Change = 7,000 Figure 5.2 Disclosing Separately the Change in Fair Value Less Cost to Sell Due to Price Change and Due to Physical ChangeChapter § - Biological Assets Notice in the illustrative example Ne vpnyescahca nple that the bi woe! & Bical change or lea! atten” Sel ones other ther mation. Biological roduction. A change in fair value of wm romtt> degeneration . i anf aga als0 a physical change, of biological ‘asset due to AGRICULTURAL PRODUCE Agricultural produce is th e pee harvested product of the entity's Agricultural produce harvested roduc from an entity's i gape measured a it far alu es stinaed cat scat the potato farest. Such Measurement is the cost at that date when appl ne aS 2, + paragrap! 13) It is always presumed that fair val s e Iue of an a; pe determined felialy. Likewise, fair val a determined at the potnt of est; hence, the cost to sell does not include transportation cost to get the asset to another location, because presumably the fair value at he jocation is likely to change. ee A gain or loss arising from an initial recognition produce at fair value less estimated cost to sell shall fe Se oe arent joss for the period in which it arises. A gain or loss may arise on initial recognition of agricultural. produce as a result of harvesting (IAS 41 paragraphs 28 and 29). r ‘After harvest, the agricultural produce, which is classified as inventory, shall be measured in accordance with IAS 2 Inventories. DISCLOSURE REQUIREMENTS ‘An entity shall disclose the following relating to biological assets and agricultural produce (IAS 40, paragraphs 40 - 57) (a) the aggregate gain or loss on initial recognition of biological aoe eee agricultural produce and from the change in fair Value less cost to sell of the biological assets; (b) a description of each group of biological assets; mn title and carrying amounts rity for liabilities; ts for the development oF (c} any restrictions o of biological assets pledged as sec (@) the amounts of commitment acquisition of biological assets: 281togical Assets Chapter 5 - Biological AS2™ (O} 6 @ th) tC) a financial risk management strategies related to apr Srculy activity; ‘ « reconciiation of changes 1” comyiNg amount, separately changes iD value, Purchases, saleq” ‘Hoy, business combination ‘and exchange differences,” gain or loss 07 disposal; where fair value cannot be measured religh, depreciation method used, useful lives or depreciatin’* the impairment losses and reversal of impairment, pe a disposal and reconciliation of beginning carrying "Y Bin ending carrying amount. why fair value is now reliably mea: NEY Ipange for biological assets pei accumulated deprecigre ang ‘unt an explanation the effect of 1 measured at cost less impairment loss; and the nature and extent of government grants of bj assets, conditions relating to the grants that have a failed and significant changes in the expected levels oft grants. 282Chapter 5 - Biological Assets KEY TERMS USED IN THIS CHAPTER garket. A market in which transactions for the asset or liability jaitt Pace with sufficient frequency and volume, to provide pricing He aon of an ongoing bass, inl activity. Management by an entity of the biological seistteemation of biological assets for sale, into agricultural produce, or tional biological assets. pinta wrOgaee: ‘The harvested product of the entity’s biological 13. : bas at, A living plant that is used in the production or supply of ese qalural produce, is expected io bear produce for more than one wy, und has a remote likelihood of being sold as agricultural perce, except for incidental erop sales great asset. A living animal or plant slots “transformation. Comprises the processes of growth, solpecreration, production, and procreation that cause qualitative or Sbautatve changes in a ological asset. vangell. Costs to cell biological assets or agricultural produce at their ot ent jocation and condition without moving them to the market a ad al miue. The price that would be received to sell an asset or paid to unser a liability in an orderly transaction between market pancipants at the measurement date, qgernment grants. Assistance by government in the form of transfers of wesourees to an entity in return for past or future compliance with {ertain conditions relating to the operating activities of the entity. croup of biological assets. An aggregation of similar living animals or plants. Hawvest. The detachment of product from a biological asset’ or the ‘cessation of a biological asset’s life processes. ADDED LEARNING APPLICABLE TO SMALL ENTITIES AND MEDIUM- SUED ENTITIES small entity applying PFRS for Small Entities has an option to measure its biological assets applying either the current market price model or the cost adel Agricultural produce harvested shail be measured at current market Pree atthe point of harvest. Pastel applying the IFRS for SMEs shall measure biological asset at initial nee and at the reporting date at fair value less costs to sell bslal assets whose fair value cannot be readily determined without “IM cost or effort. Agricultural produce shall be measured at fair value LScosis to sell at the point of harvest 283Chapter 5 - Biological Asset CHAPTER SUMMARY als or plants. Exampy, @ /Biological abaete-are living anlmeis Or ein aranch ee at tnd ahrabo in a pantation far ond animale & ranch es in the harvested product of the entity, Ane produce is the iy Degg * ant that 8 used in the produc, ed to bear produce 40 'y of agricultural produce, is expects Produce f° o¢ es a a has a remote likelihood of being gr" curioultural produce, except for incidental scrap sales. Beater ace appropriately classified as part of property, plant and equip Tres ene measured based on the measurement models applica property, plant and equipment. initially a biological asset when the enters te * An entity recognizes Nine avect as a result of past event; it is probable that jane controls the asset a5 economic benefits wil flow to the entity; and the fair value or epgi;° measurable reliably. A bearer plant is a living Pl oy measured initially and at each repering A biological asset should be .d costs to sell. date at its fair value less estimate Change in fair value less costs to sell of a biological asset is taken profit or loss in the period in which the change arises. When the fair value of a biological asset cannot be measured reliably, it is measured in the statement of financial position at cost less accumulated depreciation and accumulated impairment losses. At other biological assets held by the entity shall still be measured at fir value less estimated costs to sell. If the fair valtie becomes relistly measurable for a biological asset previously measured at cost, the enterprise shall switch to fair value less cost to sell measurement. All costs related to biological assets that are measured at fair value are recognized in profit or loss when incurred, except for the cost f purchase. % Agricultural produce is measured at fair value less costs to sell athe point of harvest, There is no exemption to this rule, as there # * presumption that the fair value of agricultural produce can always b° measured reliably. After harvest, if agricultural produce are held for sale in the norm course of business or are processed further, IAS/PAS 2, Inventors shall apply. ; 284Chapter § - Biological Assets DISCUSSION QUESTIONS What are biological assets? 1 i agricultural produce? from bearer planta werentated from what are bearer plants? Give exampl ples of bearer pla they presented on the statement of financial ant How are Give specific examples of biological assets fo rm forest and give examples oftheir agricutural produce what is the proper measurement basis for bi initial recognition? is for biological assets at What is the proper measurement basis for biological assets in the statement of financial position? How is the change in fair value less cost to sell of biological assets treated in the financial statements? Is there any instance when biological assets are not measured at fair value less cost to sell? Is there any instance when agricultural produce is not initially recognized at fair value less cost to sell? Give examples of cost to sell of biological assets and agricultural produce. How are agricultural produce measured after the point of harvest? How is fair value of biological assets determined? 285Chapter 5 - Biological Assets 51 5-2. Indicate whether eac! POND PEDa PROBLEMS hh of the following is (A) Biological Asset (B) Bearer Plant (C) Agricultural Produce (D) Product after harvest (6) Some other item of agricultural produce Tobacco plants Picked tobacco leaves Cured tobacco Mango tree Mango fruit stil Dried mango Harvested mango Felled trees Logs and lumber Trees in a timber plantation ‘Trees in Enchanted Kingdom Growing rice plant Harvested rice grains Milled rice Wine Picked grapes Grape vines Unprocessed Milk Cattle Cheese Tea bushes expected to produce for m aa Picked leaves from tea bushes reat tae Tea Palm oi Picked palm fruit Palm trees Carcass Sausages Pigs Rubber trees | awaiting ripening in the tree Al ‘BC Farms has these balances in its financial records: a Carrying value of biologi December 31, 2018, Po gasets (FV less cost to sll. Biological asset 3,200,000, 8 Purchased during 2019, ath 28658 Chapter 5 ~ Biological Assets Fair valuation loss on initial recognition at fair value es © cost to sell, P150,000. ee lue less 4. Increase in fair value due to biological transformation and price fluctuations during the period, P2,000,000. Decrease in fair value due to harvest, P1,000,000. REQUIRED: Determine the amount at which biological assets would be presented in the statement of financial position at December 31, 2019. Indicate the accounts and amounts that will be shown on the ‘statement of comprehensive income relating to the above. (a) o) panchero Corporation produces milk on its farms located in Southern Mindanao. At December 31, 2018, the herds of cows are as follows: 2,000 cows (3 years old) all purchased in prior years 11000 heifers (1.5 years old when purchased on June 30, 2018) 500 heifers (2 years old) purchased on December 31, 2018 No animals were born or sold during the year 2019. ‘The unit values less estimated cost to sell of the animals were as follows: At December 31, 2018 : 1-year old 25,000 1.5-year old 29,000 2-year old 35,000 3-year old 44,000 At June 30, 2019 L-year old 26,500 15-year old 30,000 At December 31, 2019 2-year old 37,500 3-year old 47,000 4-year old. 55,000 28754, iD: REQUIRE! ing the reconciliation of p sion a noe of biological assets (@) epal ‘ending bala purchase and change w iy balances” og the period due 10 value. fair valle 1e5S C0St to se gy y (o) — Compute ical asse nerd vee change and Q) physical change - palance computed in (a) above wi Reconcile the ending bal th te (6) Repofee Tess cost t0 sell of ‘he animals at Decentey st 2019. (a) Give the entries for 20190 record the foregoing information, ‘Aherd of ten 2 year-old animals was held at January 1, 2019, op, animal (aged 2.5 years old) was purchased on July 1, 2019 jp aa eer one animal was born on July 1, 2019. Two 3-year cece were acid at December 31, 2019 for P13,500 eack, te ‘company incurring P1,500 on the sale ofeach. er unit fair values less estimated cost to sell were as follows: January 1, 2019 2-year old animal Pu July 1, 2019 New born animal 7,000 2.8-year old animal 10,800 December 31, 2019 ‘New born animal * 7,200 0.5-year old animal 8,000 2-year old animal 10,500 2.5-year old animal 11,100 3-year old animal 12000 ‘REQUIRED: (a) Compute for changes in fair value les i Pie SR ale ct to sell attributable © (0) Prepare the entries for the foregoing, (c) Prepare a schedule reconcit inning balances ‘ ling the beg be with gi the ending balances and showing the changes during 288iological Ass Chapter 5 eriod due to purchase, change in fair value and sale of biological assets. ay Reconcile the ending batances computed in (withthe far (@ jaiue less estimated cost to sell of the biological assets held py the entity at December 31, 2019. 289Ch Mc1 MC 2 Mc 3 mca Mc 5 jer 5 - Biological Assets MULTIPLE CHOICE QUESTIONS A biological asset is a. a living plant or animal held by @ company engagey fi i 1 goods. manufacture of industrial b. aliving plant or animal held by an enterprise engages agricultural activities. c. _any asset owned and controlled by an entity engaged jn. ‘cultural activity. n a Sing plant or animal and the land on which the plang i, attached. ity engaged i ture are ct Farm lots held by an entity engaged in agricul ang on the entity's statement of financial position as agricultural assets. biological assets. agricultural produce property, plant and equipment, pege The harvested products of the entity’s biological assets are referred to by IAS 41, Agriculture, as agricultural harvest agricultural products. agricultural produce biological produce. poge A living plant that is used in the production or. supply or agricultural produce, is expected to bear produce for more than one period, and has a remote likelihood of being sold, except for incidental scrap sales, is most appropriately presented in the statement of financial position as part of a, agricultural asseta b. biological assets, c.° inventories. 4. property, plant and equipment Biological assets are initially recognized in the books at a purchase price, b. purchase price phus transaction costs, c. fair value. a. fair value less estimated cost to sell, 2901 yc a) xe10 Chapter 5 ~ Biological Assets oiogical assets Te measured in the statement of financial positon at purchase price plus transaction costs. a. cost less accumulated depreciation and accumulated impairment losses, «fair value. fair value less estimated cost to sel. when the fair value of a biological asset cannot be reliably Preasured, the asset shall be measured at purchase price less estimated cost to sell shall be measured at cost less accumulated depreciation and impairment losses. shall be appraised by an independent appraiser and shall be measured at appraised value. 4. ‘shall not be shown on the statement of financial position. a b c ‘the change in fair value less estimated cost to sell of a biological asset shall be a ignored. b. taken to profit or loss during the period in which the change arises. «taken to equity under the heading comprehensive income. 4 taken to equity until such date that the asset is disposed of, at which date, any balance in the equity shall be taken to profit or loss. ‘An agricultural produce at the point of harvest shall be a recognized and measured at fair value. b. recognized and measured at fair value less estimated cost to sell. taken to profit or loss at fair value. 4. ignored until actual disposal. After harvest, agricultural produce held for sale in the ordinary course of business shalll be dealt with by the entity in accordance with a. IAS 2, Inventories. b. IAS 11, Construction Contracts. & IAS 41, Agriculture. . 4. IFRS 8, Discontinued Operations and Non-Current Assets Held for Sale.Chapter § - Biological Assets MC11 Mc12 Mc13 MC14 Which of the followin assets and agricultu 1. It. Iv. poop g statements are correct reRarding bioly ral produce? cr sition, biol tement of financial position, biological 9, whose fe Te cost less accumulated depreciation 0 impairment losses. irorrral assets are initially measured at Purchase py, lus transaction costs. ' pe rice in.an active market is considered to be the basis for determining the agricultural produce. seriewhange in fair value Tess estimated Cost to set) op is reported as income or loss in prof» in which the change arises. a fair value of biological asscta nt biological assets loss in the period 1,11, TH, and IV 1, If, and IV 1, MI, and IV 1,01, and IL Under IAS 41 Agriculture, which among the following is not included in cost to sell of an agricultural produce? a. b. d. Levies by regulatory authorities Costs of getting the assets to market ‘Transfer taxes and duties Broker's commission Which of the following is not used as a basis in determining the fair value of biological assets? a. b, c . Price in an active market Appraised value based on an independent appraisal Most recent market transaction price Benchmarks of prices within the sector Which among the following is not a required disclosure for biological assets under IAS 41? a. ‘The aggregate gain or loss on initial recognition of biological assets and from change in fair value less estimated cost to sell Restrictions on title of biological assets held by an entity Number of animals classified as biological assets bor during the period Financial “risk management related to agricultural activities. 292Chapter 5 - Biological Assets the fair value of the biological asset, previously measured at wet less accumulated “depreciation, becomes reliably esigurable, the entity must oss id switch to the fair value less cost to sell measurement pasis, the amount of adjustment taken to profit or loss. witch to the fair value less cost to sell measurement basis, the amount of adjustment taken to other comprehensive income under the heading “Unrealized Balt ontologies Areca”, * switch to the fair value less cost to sell measurement basis, the amount of adjustment taken as an adjustment to the beginning balance of retained earnings. continue to measure the same asset at cost less accumulated depreciation and impairment losses. ois Which af the following statements i valid? When a calf is born, a gain arising from change in fai less cost to sell due to price change is recognized in profit or ir value loss. When a calf is born, again arising from change in fair value b less cost to sell due to price change is recognized in other comprehensive income. When a calf is born, a gain arising from change in fair valuc less cost to sell due to physical change is recognized in profit or loss. When a calf is born, a gain arising from change in fair value cs less cost to sell due to physical change is recognized in other comprehensive income. 17 The following information are made available by Robina Farms, of its dairy livestock: Carrying amount, January 1, 2019 450,000 FV less cost to sell of livestock purchased during the period 250,000 Increase in fair value less estimated cost to sell attributable to physical changes 220,000 Increase in fair value legs estimated cost to. sell attributable to price changes 64,000 Total selling price less cost to sell of livestock 290,000 sold during the period 293 hada beChapter 5 - Biological Assets Mc18 Mc19 biological assets De carte hat amount should the . : At what amount fer position at December 31, 20197 On thy a. 1,274,000 b. P 764,000 ce. — P_ 694,000 dP 630,000 Use the same information given in MC17, what amount shay y Use the someross income of Robina Farms as a result of ye transactions on its dairy livestock? a P_64,000 b. — P220,000 c. P284,000 d. — P290,000 ‘A group of twenty 2-year old cattle was held at January 1, Owethie date, five 2-year old cattle were purchased for 12.000 sc, ‘No cows or calves were disposed of d and 5 calves were born. the period. Per unit fair values less cost to sell were as follows: January 1, 2019 2,year old cattle 12,000 Newborn cattle 4,000 December 31, 2019 2-year old cattle 13,000 3-year old cattle 15,000 1-year old cattle 7,000 5,000 Newborn cattle ‘The company records separately the increase in fair value less cost to sell due to physical change and change in fair value less cost to sell due to price change. How much shall be taken to profit or loss as a gain arising fron change in fair value due to physical change? a P-30,000 b. 60,000 cP 80,000 d.. P110,000 294? % a = Biological Asset® Chapter 5 shall be taken tion given in MC19, how much ¢ i value due to same informa gain arising from change in fair ust fie or Joss as @ wee ‘change? p 30,000 % — p 60,000 — p 90,000 5 110,000 wat amount shall be me information given in MC19, whi ecember 31, yee the $2 te aes ‘on the statement of financial position on De erg under the caption Biological Assets? ‘ 320,000 b 350,000 390,000 a 410,000 tne the same information in MC19 and assume that ten 3-year old ie were sold realizing net proceeds of P15,000 on-each cattle. 's profit carr much gr0s6 income shall be reported on the company Hives for the year ended December 31, 2019? 2 P.80,000 b. P110,000 <_ P150,000 a P260,000 ‘he following information pertains to Nestle Company's biological assets at December 31, 2019: 5,000,000 price of the assets in an active market 50,000 Estimated brokers’ and dealers’ commissions ‘transport and other costs expected to be incurred to bring the assets to the market Selig price in a binding sale agreement 40,000 5,100,000 At what amount should the biological assets be statement of financial position? . Saree Ok eee 4,910,000 4,950,000 5,000,000 5,050,000 295Chapter 5 - Biological Assets Mc24 ‘Mc2s MCc26 any to engaged. in raising Asi) lveg Lee ee ny Sauer of 8 Airy Hvestock jg ws a below P10,00 y 1, 2019 000,000 Carrying value at January 2» eaten FV ae eat to sell of biological ae Lomi 4,000,009, vein fair value les Sumnsome cn ch pmoecanee 000 in arising from change i! : Gain arising all attributable f2 piiysical change 1,500,009 Decrease due to sales ean Decrease due to harvest 000 in unt’ of B-Meg’s biological assets 4, jing amor What is the carrying amou cial position? December 31, 2019 statemen a. P13,800,000 b. _P14,300,000 c. P15,800,000 d. _ P16,300,000 ‘The Central Luzon Farms harvested corn with fair value of 350,000 at the date of harvest. Estimated cost to sell is P10,009, ‘At year-end, the fair value declined slighty 1° 330,000 and no com At ye orereold at year-end. On January 15, 2019, all of the com es een sold for P345,000, the company incurring selling cost of 9,500. ‘at what amount shall the harvested corn be initially recognized? a. P330,000 b. P335,500 c, _ P340,000 a. P350,000 Use the same information given in MC25. At year-end statement of financial position, the inventory of corn shall be presented at a. P320,000 b. — P330,000 c. P335,500 d. — P340,000 296a. b. © a Chapter 5 ~ Bio! Assets ee the same information given in MC2S. How much profit (loss) yC27 gid the company realize from the sale of the corn in 2019? P 5,500 15,000 15,500 ; p25,000 297