Chapter 13
Biological Assets
Relevant Standards:
PAS 41 (Agriculture)
Harvest
– the detachment of produce from an
entity’s biological assets.
Examples are:
Definition of Terms
Biological Assets
– are living animals and living plants.
Agricultural Activity
– 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.
Examples are:
a. Raising livestock
b. Annual of perennial cropping
c. Cultivating orchards and plantation
d. Aquaculture (including fish farming)
e. Floriculture
f. Cultivating
g. Forestry
Biological Transformation
- relates to the processes of growth,
degeneration
and
production
and
procreation that cause quantitative or
qualitative changes in a biological asset.
1. Asset changes through
a. Growth – increase in quantity
or improvement in quality if
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
Agricultural Produce
– the harvested products of an entity’s
Biological
Assets
Sheep
Dairy cattle
Tobacco plants
Tea bushes
Grape vines
Oil palms
Rubber trees
Agricultural
Produce
Wool
Milk
Picked Leaves
Picked Leaves
Grapes
Palms
Latex
Processed
Products
Yarn or Carpet
Cheese
Cured Tobacco
Tea
Wine
Palm Oil
Rubber
Recognition
An entity shall recognize a biological asset
or agricultural produce when and only
when:
a. The entity controls the asset as a
result of past events.
b. It is probable that future economic
benefits associated with the asset
will flow to the entity, and
c. The fair value or cost of the asset can
be measured reliably.
Measurement
Biological Assets shall be measured
initially and subsequently at:
Fair Value less Cost of Disposal
If fair value cannot be measured
reliably then it shall be measured at:
Cost less any accumulated depreciation
and any impairment losses.
(However, Once the fair value of the
biological
asset
becomes
reliably
measurable, the entity shall measure at its
fair value less estimated point of sale cost).
biological assets and those that are still in
their natural state or in other terms, not
processed yet.
Fact Sheets for Intermediate Accounting 3. Chapter 13.
Page 1 of 3 | Prepared by: Gerwin Raguindin
Sources: Philippine Accounting Standards, Intermediate Accounting 3 Textbooks (Millan & Valix), and The Review Center of Accountancy
Fair Value
- The price would be received to sell an
asset or paid to transfer a liability in an
orderly transaction between market
participants at the measurement date.
Cost of Disposal or Cost to Sell
- Incremental Costs directly attributable to
disposal of an asset.
Gain or Loss - shall be included in profit
or loss. A gain may arise when there is
growth, and a loss may arise on initial
recognition because of cost of disposal
when determining the fair value of the
asset.
Gain or Loss shall be computed by:
• Price Change:
It includes: “CoLeCT”
a. Commissions to Broker
b. Levies by regulatory agencies and
Commodity exchanges
c. Transfer taxes and duties.
It does not include: (expensed outright)
a. Finance Cost
b. Income Taxes
c. Interest Expense
d. Advertising
e. Transportation (However, if location
is a characteristic of the Biological
Asset adjust the Fair Value for the
transportation costs).
Fair Value of Agricultural Produce
shall be measured at:
Fair value less cost of disposal at the
point of harvest and classified as
Inventories (PAS 2).
Biological Asset attached to Land
Land – is not considered as biological
asset. If there is no separate market for
biological asset that is attached to land,
combined asset may exist under an active
market for biological asset and land.
To get the fair value of biological asset
attached to land:
Fair Value of Combined Asset less the
Fair Value of the Land
(𝑭𝒂𝒊𝒓 𝑽𝒂𝒍𝒖𝒆 𝒍𝒆𝒔𝒔 𝑪𝒐𝒔𝒕 𝒐𝒇 𝑫𝒊𝒔𝒑𝒐𝒔𝒂𝒍,
𝒆𝒏𝒅. 𝐴𝑔𝑒 𝑎𝑠 𝑜𝑓 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 −𝑭𝒂𝒊𝒓
𝑽𝒂𝒍𝒖𝒆 𝒍𝒆𝒔𝒔 𝑪𝒐𝒔𝒕 𝒐𝒇 𝑫𝒊𝒔𝒑𝒐𝒔𝒂𝒍,
𝒃𝒆𝒈𝒊𝒏𝒏𝒊𝒏𝒈. 𝐴𝑔𝑒 𝑎𝑠 𝑜𝑓
𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔)×𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦
•
Physical Change:
[(𝐹𝑎𝑖𝑟 𝑉𝑎𝑙𝑢𝑒 𝑙𝑒𝑠𝑠 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐷𝑖𝑠𝑝𝑜𝑠𝑎𝑙,
𝑒𝑛𝑑. 𝑨𝒈𝒆 𝒂𝒔 𝒐𝒇 𝒆𝒏𝒅 −𝐹𝑎𝑖𝑟 𝑉𝑎𝑙𝑢𝑒
𝑙𝑒𝑠𝑠 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐷𝑖𝑠𝑝𝑜𝑠𝑎𝑙, 𝑒𝑛𝑑. 𝑨𝒈𝒆 𝒂𝒔
𝒐𝒇 𝒃𝒆𝒈𝒊𝒏𝒏𝒊𝒏𝒈) ×𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦]
+𝐹𝑉𝐿𝐶𝑆 𝑜𝑓 𝑛𝑒𝑤𝑏𝑜𝑟𝑛 𝑎𝑡 𝑑𝑎𝑡𝑒 𝑜𝑓
𝑏𝑖𝑟𝑡ℎ
•
Reconciliation:
𝑻𝒐𝒕𝒂𝒍 𝑮𝒂𝒊𝒏 𝒐𝒓 𝑳𝒐𝒔𝒔=𝐶ℎ𝑎𝑛𝑔𝑒 𝑖𝑛
𝐹𝑉𝐿𝐶𝑆 𝑑𝑢𝑒 𝑡𝑜 𝑝𝑟𝑖𝑐𝑒
𝑐ℎ𝑎𝑛𝑔𝑒+𝐶ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐹𝑉𝐿𝐶𝑆 𝑑𝑢𝑒 𝑡𝑜
𝑝ℎ𝑦𝑠𝑖𝑐𝑎𝑙 𝑐ℎ𝑎𝑛𝑔𝑒
Bearer Plant
- shall be accounted for in the same way as
Property, Plant, and Equipment. A bearer
plant is a living plant that is:
a. Used in the production or supply of
agricultural produce.
b. Expected to produce for more than a
year.
c. Has a remote likelihood of being
sold as agricultural produce, except
for incidental scrap sales.
Fact Sheets for Intermediate Accounting 3. Chapter 13.
Page 2 of 3 | Prepared by: Gerwin Raguindin
Sources: Philippine Accounting Standards, Intermediate Accounting 3 Textbooks (Millan & Valix), and The Review Center of Accountancy
Elements of Cost on Bearer Plants
(PAS 16): The costs that are included in
the cultivation of bearer plants (such as oil
palms and rubber trees) would typically
include:
1. Land preparation (including land
improvements that are capitalized
as land cost)
2. Planting materials such as seedlings
3. Fertilizers, chemicals, and other
inputs
4. Direct labor
5. Supervision and other maintenance
costs including sub-contractors’
costs
6. Plantation overheads
7. Borrowing costs to the extent that
they are incurred and capitalized
only during the immature period
Plant with dual use
- reported as Biological Asset. A plant may
have a dual use if:
a. It is cultivated for bearing
agricultural produce.
b. It is being sold either as living plant
or an agricultural produce.
Bearer plants will be subject to all of the
recognition and measurement
requirements of PAS 16:
a. Immature bearer plants will be
measured at their accumulated
cost, similar to the accounting
treatment for a self-constructed
item of plant and equipment before
it is ’available for use’.
b. Mature bearer plants will be
measured using either the cost
model or the revaluation model.
Agricultural Produce growing on
Bearer Plants – is classified as biological
assets and is measured at the end of each
reporting period prior to harvest at:
Fair Value less Cost of Disposal
Bearer Animals
- accounted for as Biological Asset.
Animal-related recreational activities are
accounted for in accordance with PAS 16.
Government Grants
- Only government grants that are related to
biological assets measured at FVLCS are
accounted for under PAS 41.
government grant is:
1. Unconditional – recognized in Profit
or Loss when it becomes receivable.
2. Conditional – recognized in profit or
loss when the conditions attached
are met.
3. Conditional but the terms grant allow
part of it to be retained according to
the time it has elapsed – portion of
the grant is recognized in profit or
loss as time passes.
Financial Statement Presentation
• Financial Position – separate line
item and classified as noncurrent.
• Income Statement – Aggregation of
gain and losses on initial recognition
of biological assets and agricultural
produce from the change in FVLCS
of biological assets.
Not a bearer plant:
a. Trees grown to be harvested & sold
b. Annual Crops
Fact Sheets for Intermediate Accounting 3. Chapter 13.
Page 3 of 3 | Prepared by: Gerwin Raguindin
Sources: Philippine Accounting Standards, Intermediate Accounting 3 Textbooks (Millan & Valix), and The Review Center of Accountancy