Chapter 8

AGRICULTURE
Learning Objectives
• Differentiate between the following : biological asset,
agricultural produce and inventory.
• State the initial and subsequent measurements of
biological assets and agricultural produce.
What is AGRICULTURE?
Agricultural Activity

is the management by an entity of the biological

transformation and harvest of biological assets for sale,
including exchange or non exchange transaction, or for
conversion into agricultural produce, or into additional
biological asset.
The following are the common features of agricultural
activities:
• Capability to change - living animals are capable of
biological transformation
• Management of change- management facilities biological
transformation by enhancing, or at least stabilizing
conditions necessary for the process to take place.
• Measurement of change - the change in quality or
quantity brought about about by biological transformation
or harvest is measured and monitored as a routine
mnagement function
 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.
c. Degeneration - is a decrease in the quantity or
deterioratiin in quality of an animal or plant.
Ii. Production of agricultural produce
Biological Asset

• is a living animal or plant

Agricultural Produce
• is the harvested product of the entity’s biological assets.
“Harvest” is the detachment of produce from a biological
asset or the cessation of a biological asset’s life
processes
Examples:
Biological Assets Agricultural produce Products that are the result of
processing after harvest
Tree in a plantation forest Felled Trees Logs, Lumber

Plants Harvested palay, Harvested Rice, Sugar, Corn Flour, Corn

cane, Corn Cotton Starch, Thread, Clothing
Dairy Cattle Milk Cheese

Sheep Wool Yarn, Carpet

Pigs Carcass Sausages, Cured Hams

Bushes Leaf Tea, Cured tobacco

Vines Grapes Wine

Fruit trees Picked fruit Processed fruit

Recognition
• A biological asset or agricultural produce is recognized
when it meets the asset recognition criteria, including the
reliable measurement of its fair value or cost
Measurement
• Biolgical Assets are initially and subsequently measured
at fair value less costs to sell.
Agricultural produce is initially mured at fair value less costs
to sell at the point of harvest.’’

Cost to sell
Determination of Fair value

a. Fair value is determined as follows:

Quoted price in an active market XX

Less: Transparent costs XX
Fair value XX
vvvvvvvvvvv
Due to physical change:
(FVLCS end, age end) - (FVLCS end, age beg) x Qty + FVLCS of
newborn at date of birth.

1. (5,700 - 5,200) x 5 = 2,500

2. (2,150 - 2,100) x 10 = 500
3. (5,400 - 5,200) x 2 = 400
4. (2100-2100) = 0
5. (2,000 x 10) = 20,000
6. (2,100 x 3) = 6,300
Change in FVLCS due to Physical Change = 29, 700
FVLCS formulas
Due to price change:
(FVLCS end, Age beg) - )FVLCS beg, Age Beg) X Qty

Due to physical change:

(FVLCS end, age end) - (FVLCS end, age beg) x Qty + FVLCS of newborn at
date of birth.