Biological Assets

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BIOLOGICAL ASSETS

Inclusions
PAS 41, applies to the following when they relate to agricultural activity:
1. Biological assets, except bearer plants
2. Agricultural produce at the point of harvest
3. Unconditional government grants related to biological assets

Exclusions
PAS 41 does not apply to the following:
1. Land related to agricultural activity (PAS 16)
2. Bearer plants (PAS 16)
Note: PAS 41 applies on the agricultural produce of bearer plants
3. Government grants related to bearer plants (PAS 20)
4. Intangible assets related to agricultural activity (PAS 38)

BIOLOGICAL ASSETS – are living animals and living plants.

As to Consumption
a. Consumable Biological Assets – those that are to be harvested as agricultural produce or sold as biological assets.
b. Bearer Biological Assets – those that are held to bear produce. Only the agricultural produce is harvested while the
biological asset remains.

As to Maturity
a. Mature Biological Assets – are those that have attained harvestable specifications (for consumable biological assets)
or are able to sustain regular harvests (for bearer biological assets)
b. Immature Biological Assets – are those that DO NOT attained harvestable specifications (for consumable biological
assets) or are able to sustain regular harvests (for bearer biological assets)

AGRICULTURAL PRODUCE – is the harvested produce of the entity’s biological assets.


Note: Agricultural produce refers to those that are in their natural state and are not yet processed.
Processed agricultural produce are treated as inventories.

AGRICULTURE – is the management by an entity of the biological transformation and harvest of biological assets for sale or for
conversion intro agricultural produce or into additional biological assets.

Features of Agriculture
a. Capability to change – living animals and plants are capable to biological transformation.

Biological transformation results from the following types of outcome:


1. Asset changes through:
a. Growth – an increase in quantity or improvement in quality of an animal or plant.
b. Degeneration – a decrease in quantity or deterioration in quality of an animal or plant.
c. Procreation – creation of additional living animal or plant.
2. Production of agricultural produce such as latex, tea leaf, wool and milk

b. Management of change – the agricultural activity must be “managed” to facilitate biological transformation by
enhancing or atleast stabilizing conditions necessary for the process to take place.

NOTE: Management of change distinguishes agricultural activity from other activities.


Agriculture Not Agriculture
Raising Livestock Ocean Fishing
Forestry Deforestation
Annual or Perennial Cropping Hunting in the Forest
Cultivating Orchards and Plantation
Aquaculture and Floriculture
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c. Measurement of change – the change in quality or quantity brought about by biological transformation or harvest is
measured and monitored as a routine management function.

AGRICULTURAL PRODUCE PRODUCTS AFTER


BIOLOGICAL ASSETS BEARER PLANTS
AT THE POINT OF HARVEST FURTHER PROCESSING
(PAS 41) (PAS 16)
(PAS 41) (PAS 2)
Sheep Wool Yarn, Carpet
Trees in Plantation Felled Trees Logs, Lumber
Dairy Cattle Milk Cheese
Pigs Carcass Sausages, Cured Hams
Cotton Plants Harvested Cotton Thread, Clothing
Sugarcane Harvested Cane Sugar
Tobacco Plants Picked Leaves Cured Tobacco
Tea Bushes Picked Leaves Tea
Grape Vines Picked Grapes Wine
Fruit Trees Picked Fruit Processed Fruit
Oil Palms Picked Fruit Palm Oil
Rubber Trees Harvested Latex Rubber Products

BEARER PLANTS – 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
NOTES:
 Agricultural produce growing on bearer plants remains within the scope of PAS 41.
 A plant with dual use is reported as BIOLOGICAL ASSET and not as bearer plant. A plant may have a dual use namely:
o The plant is cultivated for bearing agricultural produce.
o The plant itself is being sold either as living plant or an agricultural produce.
 Biological assets are often physically attached to land which usually do not have a separate market. On the other hand, an
active market may exist for the combined assets which is used in determining the fair value of the biological assets (i.e. the
fair value of the land may be deducted from the fair value of the combined assets to arrive at the fair value of the trees in
the plantation forest)

RECOGNITION – an entity shall recognize a biological asset or an agricultural produce when:


a. The entity controls the asset as a result of past event.
b. It is probable that future economic benefits associated with the asset will flow to the entity.
c. The fair value or cost of the asset can be measured reliably.

MEASUREMENT
a. BIOLOGICAL ASSETS
 Initial Measurement: Fair Value – Costs to Sell / Carrying Amount / Cost
 Subsequent Measurement: Fair Value – Costs to Sell
b. AGRICULTURAL PRODUCE
 Initial Measurement: Fair Value – Costs to Sell
 Subsequent Measurement: PAS 2 or other applicable standards
NOTE: In all cases, an entity shall measure agricultural produce at the point of harvest at fair value less cost of
disposal. The initial measurement will be the deemed cost for subsequent accounting using PAS 2 or other
applicable standards.

GAINS OR LOSSES Biological Assets Initial Cash Outflow (Cost) ≠ Initial Measurement (FV – CTS)
a. On Initial Recognition Initial Cost Outflow > Initial Measurement
Bearer Biological Asset
= LOSS
Agricultural Produce
Initial Cash Outflow < Initial Measurement
Consumable Biological = GAIN
Asset
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b. On Changes in Fair Value


 Price Change = (Price End, Beg. Age – Price Beg, Beg. Age) x Quantity
o Same age, Different Date
 Physical Change = (Price End, End Age – Price End, Beg. Age) x Quantity + FVLCTS of Newborn
o Different Age, Same Date

c. On Government Grant
NOTE: Only government grants related to biological assets are accounted under PAS 41. Government grants of PPE are
accounted under PAS 20. All income from government grants are presented in profit or loss.

Under PAS 41, if the government grant is:


NATURE OF CONDITION WHEN TO RECOGNIZE INCOME?
Unconditional When the grant becomes receivable
Conditional When the attached conditions are met
Conditional but terms of the grant allow part of it be Income as time passes using straight line method
retained according to the time that has elapsed

PRESENTATION AND DISCLOSURE


a. Presentation
 Biological Assets – normally Non-Current Asset
 Agricultural Produce – after the point of harvest, normally presented as Inventories under current assets unless
other standards apply
b. Encouraged Disclosure
 Disclosure of consumable and bearer biological assets
 Disclosure of mature and immature biological assets
 Disclosure of breakdown of total gain or loss from changes in FVLCTS during the period attributable to price
change and physical change

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