PRELEC1 - D01
PRELEC1 – MODULE 1
IAS 41 – AGRICULTURE
LEARNING OUTCOMES
Identify the different types of biological assets.
Be able to account for and differentiate bearer plants, biological assets and agricultural produce.
Account properly gains or losses from changes in fair value less cost to sell.
Account properly the disclosures of price change and physical change of biological assets.
Account properly for the expenses related to biological assets.
DIRECTION FOR USE
Please follow this step-by-step guide in understanding the materials properly:
1. Before starting this module, make sure you are done reading and answering all materials from previous
modules.
2. Know your study habits, find your best study time, study area, attention span, rest intervals time, needs
and motivations.
3. Be aware of your time and self-management. Compare your work patterns to the deadlines set in this
course to schedule and personalize your learning experience.
4. Before starting a study session make yourself comfortable, empty your mind of worries and minimize
or eliminate any distractions if at all possible.
5. This module has three parts, (1) the discussion material, (2) the activity set and (3) the output set.
6. You have to read the material carefully while highlighting the important terminologies and sections to
fully appreciate the topic.
7. Illustrations will always be encased in a box. You should pay special attention to them as they detail the
application of the subject matter into problem solving.
8. Try to recalculate illustration solutions as much as possible.
9. Skim down the topic and create your own summary.
10. Move to the exercise sets after finishing the discussion material. Do not hesitate to use the discussion
material side-by-side with your activity set. I advise you to use the illustrations as guide in solving your
exercises.
11. Should you find a specific topic difficult to understand you may contact me in one of the following
means:
Mobile Number:
Email:
Messenger GC:
0956 447 9411
spsps.koledan@gmail.com
PRELEC1 Summer 2020
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PRELEC1 - D01
IAS 41 – AGRICULTURE
OVERVIEW
IAS 41 Agriculture sets out the accounting for agricultural activity. The standard generally requires biological
assets to be measured at fair value less costs to sell.
SCOPE
IAS 41 applies to biological assets (living plants and animals) with the exception of bearer plants and
agricultural produce at the point of harvest.
It does not apply to land related to agricultural activity, intangible assets related to agricultural activity,
government grants related to bearer plants, and bearer plants. However, it does apply to produce growing on
bearer plants.
KEY TERMINOLOGIES




Biological Assets - A living animal or plant
Bearer plant - A living plant that:
o is used in the production or supply of agricultural produce
o is expected to bear produce for more than one period, and
o has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.
Agricultural produce - The harvested product from biological assets
Cost to sell - Costs directly attributable to the disposal or sale of an asset. (Excludes finance costs and
income taxes)
IMPORTANT NOTES


All living plants and animals by nature are biological assets.
However not all biological assets are accounted for under PAS 41.
Accounting standards applicable to classes of biological assets:
Classes of living plants and animals
Biological asset
Agricultural produce, at point of harvest
Bearer plants
Accounting standard applicable
PAS 41
PAS 2
PAS 16
Agriculture
Inventories
Property plant and
equipment
Illustration:
Biological assets and their corresponding agricultural produce.
Biological Asset
Agricultural Produce
Trees
Dairy cattle
Swine
Fruit trees
Logs
Milk
Carcass
Picked fruit
Products that are the result
of processing after harvest
Lumber
Cheese
Sausages, cured hams
Processed fruit
INITIAL RECOGNITION
An entity recognizes a biological asset or agriculture produce only when:
1. the entity controls the asset as a result of past events
2. it is probable that future economic benefits will flow to the entity and;
3. the fair value or cost of the asset can be measured reliably.
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MEASUREMENT
Biological Assets
Unless fair value cannot be reliably measured, biological assets within the scope of IAS 41 are measured on
initial recognition and at subsequent reporting dates at fair value less estimated costs to sell.
Illustration 1: Initial Measurement
Margarita Farm acquired 100 pigs on January 1, 2020 for a cost of P5,500 each, equal its current fair
value and a cost to sell of P500 each.
Biological assets
*500,000
Illustration:
Cash
500,000
Marina harvested 1,000 kilos of ripe mangos on December 31, 2020. At point of harvest, the mangos
have
value–less
costx 100
to sell
of P150 per kilo. Journal entry:
*Costa=fair
(P5,500
P500)
pigs
Inventories
150,000
Illustration
2: Initial
& Subsequent
Measurement
Gain
on change
in fair value
150,000
 Thalers Farm acquired 100 pigs on January 1, 2020 for P5,000 each. On the same date the pigs had a fair
value less cost
to sell isofmeasured
P6,000 each.
Journal
Agricultural
produce
at fair
valueentry:
less costs to sell at harvest, and this measurement is
Biological
600,000
considered
theassets
cost of the produce at that time (for
the purposes of IAS 2 Inventories or any other
Cash
500,000
applicable standard). [IAS 41.13]
*Gain on initial recognition of B.A.
*100,000


Fruits are agricultural produce growing on bearer plants and their coming to existence provides an
By December
31,to2020,
the pigs
had they
a fairare
value
less cost
sell of P7,000 each. Journal entry:
additional
asset
the entity,
hence
recorded
asto
a gain.
Biological assets
100,000
Gain on change in fair value
100,000
Also on December 31, 2020 the pigs gave birth to 20 newborn piglets with a fair value less cost to sell of
P1,000 each. Journal entry:
Biological assets
**Gain on change in fair value
20,000
20,000
Both initial and subsequent measurement shall follow fair value less cost to sell. If in the event fair value cannot
be determined biological assets shall be measured at cost less accumulated depreciation and impairment losses.
*On initial recognition if the acquisition cost is different from the fair value less cost to sell a gain or loss on
initial recognition shall be recorded. [IAS 41.28]
** The procreation of animals i.e. birth of piglets (increase in number) is a gain on change in fair value as part of
physical change.

During the year Thalers incurred and paid the following costs:
Animal feeds
P 50,000
Supplements & vaccines
25,000
Maintenance and repairs
30,000
Salaries of farmhands
40,000
Journal entry:
Supplies expenses
Maintenance expense
Salaries expense
Cash
75,000
30,000
40,000
145,000
All costs related to biological assets that are measured at fair value are recognized as expenses when
incurred, other than costs to purchase biological assets. Costs such as fertilizers, animal feeds and similar
items shall be treated as outright expense.
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Agricultural Produce
Agricultural produce is measured at fair value less estimated costs to sell at the point of harvest. [IAS 41.13]
The price a seller would ask in a market for the produce or crop less the cost of selling i.e. rent for sales stand,
transporting the crop to the market, etc.
Bearer Plants
Bearer plants are accounted for in the same manner as a property plant and equipment which is subject to
depreciation. The account title and caption of “Bearer Plants” may be included under the line item “Property
plant and equipment.
PHYSICAL CHANGE AND PRICE CHANGE
The change in fair value of biological assets is part physical change (growth, etc) and part price change (i.e.
change in selling price in an active market). Separate disclosure of the two components is encouraged, not
required. [IAS 41.51]
Illustration 1:
Shani Company
Illustration
2: has a herd of 100 2-year old animals on January 1, 2020. No animals were sold or
disposed of during the year. The fair value less cost to sell per unit is as follows:
Shani Company has a herd of 100 2-year old animals on January 1, 2020. No animals were sold or
2-year
old animal
on January
1
P
10,000
disposed
of during
the year.
10 animals
were born on December
31, 2020.
2-year old animal on December 31
11,500
3-year
oldless
animal
onsell
December
13,500
The fair
value
cost to
per unit31
is as follows:
2-year old animal on January 1
P
10,000
2-yearCHANGE:
old animal
on December
31 change in fair value is11,500
1. PRICE
What
portion of the
due to price difference, assuming the
3-year
old
animal
on
December
31
13,500
animal is not affected by any physical transformation?
Newborn on December 31, 2020
2,500
2-year old animal on December 31
P
11,500
2-year
old animal on January 1
10,000
PRICE
CHANGE:
Increase in price
1,500
2-year
old
animal
on
December
31
P
11,500
number of animals held
x
100
2-year
oldto
animal
January 1
(10,000)
Gain due
price on
change
P
150,000
Increase in price
1,500
number
of
animals
held
x
2. PHYSICAL CHANGE: What portion of the change in fair value is100
a result of physical growth of the
Gain
due
to
price
change
P
150,000
animals?
3-year oldCHANGE:
animal on December 31
PHYSICAL
2-year old animal on December 31
3-year
olddue
animal
on December
Increase
to physical
change31
2-year
December 31
numberold
ofanimal
animalsonheld
Increase
due
to
physical
change
Gain due to physical change
number of animals held
Total gain on change in fair value
*Gain from newborn animals (2,500) x 10
Gain due to physical change
Total gain on change in fair value
P
P
13,500
11,500
13,500
2,000
(11,500)
100
2,000
200,000
100
350,000
200,000
25,000
225,000
P
375,000
P
x
P
P
x
*the fair value less cost to sell of newborn animals at the time of birth is added to physical change
exclusively since they increase the physical number of animals.
To record the gain on physical and price change:
Biological assets
Gain on change in fair value
375,000
375,000
Again, the price change and physical change gain or loss components are only disclosed in the notes
to financial statement. They are not necessarily presented in the financial statements as separate
gains or losses.
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PHYSICAL CHANGE AND PRICE CHANGE WITH NEWBORN
OTHER RELEVANT DETAILS
Agricultural land is accounted for under IAS 16 Property, Plant and Equipment. However, biological assets
(other than bearer plants) that are physically attached to land are measured as biological assets separate from
the land. In some cases, the determination of the fair value less costs to sell of the biological asset can be
based on the fair value of the combined asset (land, improvements and biological assets). [IAS 41.25]
Intangible assets relating to agricultural activity (for example, milk quotas) are accounted for under IAS 38
Intangible Assets.
Unconditional government grants received in respect of biological assets measured at fair value less costs to
sell are recognised in profit or loss when the grant becomes receivable. [IAS 41.34] If such a grant is conditional
(including where the grant requires an entity not to engage in certain agricultural activity), the entity recognises
the grant in profit or loss only when the conditions have been met. [IAS 41.35]
DISCLOSURE REQUIREMENTS
Disclosure requirements in IAS 41 include:







aggregate gain or loss from the initial recognition of biological assets and agricultural produce and the
change in fair value less costs to sell during the period* [IAS 41.40]
description of an entity's biological assets, by broad group [IAS 41.41]
description of the nature of an entity's activities with each group of biological assets and non-financial
measures or estimates of physical quantities of output during the period and assets on hand at the end
of the period [IAS 41.46]
information about biological assets whose title is restricted or that are pledged as security [IAS 41.49]
commitments for development or acquisition of biological assets [IAS 41.49]
financial risk management strategies [IAS 41.49]
reconciliation of changes in the carrying amount of biological assets, showing separately changes in
value, purchases, sales, harvesting, business combinations, and foreign exchange differences* [IAS
41.50]
If fair value cannot be measured reliably, additional required disclosures include: [IAS 41.54]
 description of the assets
 an explanation of why fair value cannot be reliably measured
 if possible, a range within which fair value is highly likely to lie
 depreciation method
 useful lives or depreciation rates
 gross carrying amount and the accumulated depreciation, beginning and ending.
Disclosure of a quantified description of each group of biological assets, distinguishing between consumable
and bearer assets or between mature and immature assets, is encouraged but not required. [IAS 41.43]
If the fair value of biological assets previously measured at cost subsequently becomes available, certain
additional disclosures are required. [IAS 41.56]
Disclosures relating to government grants include the nature and extent of grants, unfulfilled conditions, and
significant decreases expected in the level of grants. [IAS 41.57]
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REFERENCES:
Financial Accounting Vol. 2 by (Conrado T. Valix, et al.)
https://www.iasplus.com/en/standards/ias/ias41
Compiled by:
KEVIN JAMES S. OLEDAN
Activity Set 01
INSTRUCTIONS:
Write your answers on sheets of yellow paper. Label each sheet on the front top left corner with
PRELEC1 - MODULE 1 and page numbers (01, 02, 03) on the top right corner. Supply the requirements
of each activity. Provide all supporting computations and label each solution set with their respective
activity number.
Means of submission:
Home-based Learning
Your papers will be collected by the SPSPS Go Learning Team as scheduled.
E-Learning
Take photos of your answer sheets making sure all details are readable. Send your answers to our
PRELEC1 Canvas page or as instructed. I will always remind you when and how to submit your papers
thru our messenger group chat.
ACTIVITY 1
Biological assets, bearer plants and agricultural produce are the three focal points of the scope of IAS 41. Briefly
discuss and compare each.
ACTIVITY 2
Identify if the following items will be accounted for as PAS 41 biological assets, PAS 2 inventory or PAS 16
property plant and equipment.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Trees to be felled for timber.
Cows raised for milk production.
Pigs grown for meat.
Ripe mangos harvested today.
Coconut trees held exclusively for processing palm oil.
Coconut trees held exclusively for coco lumber.
Carcass of a slaughtered swine.
Coconut trees held for production of copra and for later harvest of coco lumber.
Dolphins raised for amusement and wildlife preservation in a zoo.
Horse stallion raised for racing.
ACTIVITY 3
Provide the journal entries for each of the following independent scenarios.
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PRELEC1 - D01
1. Cantarella Farm acquired 40 1-year old cattle for milk production at P25,000 each. The current fair value of
these animals were P27,000 each; cost to sell of P1,000 for each animal.
2. Merigold of Maribor acquired biological assets for a total price of P1,000,000 the fair value less cost to sell
at the time of purchase was P950,000.
3. Sigi Reuven paid the following in his startup of Dijkstra Farms:
Purchase price of 100 cows P1,000,000. (fair value less cost to sell is P1,100,000)
Cow feeds P500,000.
Supplements 700,000.
Salaries of farm hands P370,000.
ACTIVITY 4
On January 1, 2020, Yennefer of Vengerberg acquired a mountain range for P1,000,000 and for a separate price
Yennefer also paid for the 100 timber trees growing on the mountain range for P50,000 each, their current fair
value less cost to sell. By December 31, 2020 the trees have increased to a fair value of P65,000 each and if all
the 100 trees were felled and disposed, Yennefer would incur a cost to sell of P150,000. For the entire year,
Yennefer also incurred costs related to agricultural activities amounting to P100,000 inclusive of salaries of
caretaker, fertilizers, insecticides and maintenance costs.
Requirements:
1. Provide the journal entries to record the transactions in 2020.
2. What amount will be presented on Yennefer’s December 31, 2020 statement of financial position as
biological assets?
ACTIVITY 5
On January 1, 2020, Vernon Roche acquire an existing mango plantation for a price of P3,000,000 of that
amount 1,000,000 was properly recorded as land, the remaining 2,000,000 however is attributed to the 1,000
mango trees capable of produce for an estimated life of 10 years.
Requirements:
1. What account title can you suggest to be used in recording the mango trees; and under what standard
shall it be accounted for?
2. What amount of assets shall be presented in the December 31, 2020 financial statement from the
foregoing transactions?
3. What amount of expenses if any, shall be presented in the December 31, 2020 financial statement from
the foregoing transactions?
ACTIVITY 6
A public limited company, Elen Riannon Co, produces milk on its farms. As of January 1, 2020 Cromwell has a
stock of 1,050 cows (average age, 2 years old). No animals were born or sold during the year. The unit values
less estimated costs to sell were.
2-year old animal at December 31, 2020
3-year old animal at December 31, 2020
2-year old animal at January 1, 2020
4,500
5,000
4,000
Requirements:
1. For the year 2020, what amount of gain on change in fair value will be presented in the income
statement.
2. What portion of the gain on change in fair value can be attributed to price change?
3. What portion of the gain on change in fair value can be attributed to physical change?
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ACTIVITY 7 – Challenge problem (not required to be submitted but answers are appreciated)
Cirilla Fiona Co. has the following information as of January 1, 2020:
450 cows (average age, 2 years old)
150 heifers (average age, 1-year old)
Cirilla also purchased 375 heifers, average age 1-year old, on July 1, 2020|
Also, 50 animals were born on July 1, 2020.
The unit values less estimated costs to sell were.
1-year old animal at December 31, 2020
2-year old animal at December 31, 2020
1.5-year old animal at December 31, 2020
3-year old animal at December 31, 2020
1-year old animal at January 1, 2020 and July 1, 2020
2-year old animal at January 1, 2020
0.5 year old at December 31, 2020
Newborn at July 1, 2020
Newborn at December 31, 2020
P13,200
15,500
13,600
16,000
13,000
15,000
5,000
3,000
3,800
1.For the year 2020, what amount of gain on change in fair value will be presented?
2.What portion of the gain on change in fair value can be attributed to price change?
3.What portion of the gain on change in fair value can be attributed to physical change?
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PRELEC1 - D01
Output Set 01
INSTRUCTIONS:
Provide a short write-up for the requirements being described below.
Home-based Learning:
Write your answers on a letter size document file.
(printed is preferred but written outputs are understandably acceptable)
E-Learning:
Write your answers on a letter size document file (doc, docx).
Filename: Output 01 – Surname, First Name M.I
Send your answers to our PRELEC1 Canvas page or as instructed. I will always remind you when and
how to submit your papers thru our messenger group chat.
OUTPUT 01-A:
“Module 1 Concepts”
Provide a summary of key takeaways from the topic on IAS 41 Agriculture, including the aspects of:
Definition, nature, and classes
Recognition criteria
Initial and subsequent measurement
Presentation
Computational guide
You can provide illustrations or narratives as needed. Please be concise in answering one to three pages will do.
OUTPUT 01-B:
“Accounting methods on living plants and animals”
Living plants and animals or biological assets are not only accounted for under PAS 41, some of these plants
and animals fall under the standards of PAS 16 and PAS 2.



Biological assets
Property plant and equipment
Inventory
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State your thoughts, opinions and insights onto why the classes of plants and animals are accounted for
differently.
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