College of Accountancy

University of the Cordilleras

REFRESHER COURSE BATCH 2

Florendo Dauz Jr., CPA, MBA, MSA
IAS 41 - AGRICULTURE
The objective of IAS 41 is to establish standards of accounting for agricultural activity – the management of the
biological transformation of biological assets (living plants and animals) into agricultural produce (harvested
product of the entity's biological assets).

Measurement
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, unless fair value cannot be reliably measured. [IAS 41.12]

Agricultural produce is measured at fair value less estimated costs to sell at the point of harvest. [IAS 41.13]
Because harvested produce is a marketable commodity, there is no 'measurement reliability' exception for
produce.

The gain on initial recognition of biological assets at fair value less costs to sell, and changes in fair value less
costs to sell of biological assets during a period, are included in profit or loss. [IAS 41.26]

A gain on initial recognition (e.g. as a result of harvesting) of agricultural produce at fair value less costs to sell
are included in profit or loss for the period in which it arises. [IAS 41.28]

All costs related to biological assets that are measured at fair value are recognised as expenses when incurred,
other than costs to purchase biological assets.
Revision on Bearer Plants

Plants such as tea bushes, grape vines, oil palms and rubber trees, usually meet the definition of a bearer plant
and so are within the scope of IAS 16. However, the produce growing on bearer plants, for example, tea
leaves, grapes, oil palm fruit and latex, remains within the scope of IAS 41
Biological Assets

1. Columbia Company provided the following information about assets in a forest plantation:
Freestanding trees 5,000,000
Land under trees 900,000
Roads in forest 500,000
Animal related to recreational activities 2,000,000
Rubber trees and grape vine 1,500,000

What total amount should be reported as biological assets?

a. 5,000,000 c. 8,500,000
b. 6,500,000 d. 9,900,000

2. Africa Company purchased 2,000 Ilamas at the beginning of current year. These Ilamas will be sheared
semiannually and their wool sold to specialty clothing manufacturers. The IIamas were purchased for
P5,000,000. During the current year, the wool harvested but not yet sold is valued at net realizable value of
P100,000, and the decrease in fair value due to harvest is P50,000. What is the carrying amount of the biological
asset at year-end?
 a. 5,300,000 c. 5,400,000
b. 5,400,000 d. 5,100,000

3. Legend Dairy produced milk for local ice cream producers Legend Company milk for local ice cream
producers. The entity began operations at the beginning of the current year by purchasing milking cows for
P2,000,000. The entity provided the following information at the year -end relating to the milk cows:
Carrying amount - January 1 2,000,000
Change in fair value due to growth and price change 400,000
Decrease in fair value due to harvest 50,000
Milk harvested during the year but not yet sold 150,000

1. What amount of net gain on biological asset should be reported in the current year?
a. 400,000 c. 350,000
b. 600,000 d. 550,000

2. What amount of gain on agricultural produce should be recognized in the current year?
a. 150,000 c. 100,000
b. 400,000 d. 350,000
3. What is the carrying amount of the biological asset at year-end?
a. 2,000,000 c. 2,400,000
b. 2,350,00 d. 2,500,000

4. Daisy Company has a herd of 10-2 year old animals on January 1, 2022. One animal aged 2.5 years was purchased on
July 1, 2022 for P108, and one animal was born on July 1, 2022. No animals were sold or disposed of during the year. The
fair values less cost to sell unit were:

2 – year old animal on January 1, 2022 100

2.5 year old animal on July 1, 2022 108
New born animal on July 1, 2022 70
2 – year old animal on December 31, 2022 105
2.5 – year old animal on December 31, 2022 111
New born animal on December 31, 2022 72
3 – year old animal on December 31, 2022 120
0.5 – year old animal on December 31, 2022 80

The December 31, 2022 balance sheet and the 2022 income statement should report biological assets and gain
arising from change in fair value, respectively, at
a. 1,400 and 292 c. 1,400 and 55
b. 1,440 and 292 d. 1,400 and 237

5. Rainbow Company has the following information pertaining to its biological assets for the year 2022:

A herd of 100, 2-year old animals was held at January 1, 2023. Ten animals aged 2.5 years were purchased on July 1,
2023 for P5,400, and ten animals were born on July 1, 2023. No animals were sold or disposed of during the period. Per
unit fair values less estimated point-of sale costs were as follows:
2.0-year animal at January 1, 2023 P5,000
Newborn animal at July 1, 2023 3,500
2.5 year old animal at July 1, 2023 5,400
Newborn animal at December 31, 2023 3,600
0.5 year old animal at December 31, 2023 4,000
2.0 year old animal at December 31, 2023 5,250
2.5 year old animal at December 31, 2023 5,550
3.0 year old animal at December 31, 2023 6,000

Question 1: how much of the increase in the fair value of the biological assets due to price change?
a. none
b. P25,000
c. P26,500
d. P27,500

Question 2: How much of the increase in the fair value of the biological assets due to physical change?
a. P75,000
b. P79,500
c. P110,000
d. P118,500

Question 3: What is the fair value of the biological assets as of December 31, 2023?
a. P554,000
b. P581,500
c. P700,000
6. Temerity Company has different kinds of farm animals on January 1, 2015:
During the current year, several acquisitions occurred related to these farm animals.
A detailed summary of these transaction is as follows:

Carrying amount on January 1:

15 Horses (I year old) 1,000,000
10 Dairy cattle (2 years old) 400,000
8 Carabaos (2.5 years old) 200,000
20 Hogs (3 years old) 500,000

Purchase on June 30:

4 Dairy cattle (1 year old ) 150,000
6 Carabaos (6 months old) 100,000

Fair value cost of disposal on December 31:

15 Horses ( 1 year old) 1,200,000
10 Dairy cattle (2 years old) 520,000
2 Carabaos (2.5 years old) 250,000
20 Hogs (3 years old) 550,000
4 Dairy cattle (1 year old) 170,000
6 Carabaos (6 months old) 110,000

Fair value less cost of disposal on December 31:

15 Horses (2 years old) 1,350,000
10 Dairy cattle (3 years old) 580,000
8 Carabaos (3.5 years old) 290,000
20 Hogs (4 years old) 600,000
4 Dairy cattle (1.5 years old) 200,000
6 Carabaos (1 year old) 140,000

There were no farm animals sold during the year and neither were there any newborns nor deaths.

1. What is the carrying amount of the biological assets on December 31?

a. 3,160,000 c. 2,350,000
b. 2,800,000 d. 2,380,000

2. What is the gain from change in fair value attributable to price change?
a. 810,000 c. 450,000
b. 360,000 d. 0

3. What is the gain from change in fair value attributable to physical change?
a. 810,000 c. 450,000
b. 360,000 d. 700,000

1. A biological asset is
a. any intangible asset used in a biology class
b. a living plant or animal
c. any asset owned and controlled by an entity engaged in an agricultural activity.
d. a living plant or animal and the land on which the plant is attached.

2. Farm lots held by an entity engaged in agriculture are classified on the entity’s balance sheet as
a. agricultural assets
b. biological assets
c. investment property
d. property, plant, and equipment

3. The harvested products of the entity’s biological assets are referred to by PAS 41, Agriculture, as
a. agricultural harvest
b. agricultural products
c. agriculture produce
d. biological produce

4. Biological assets are initially recognized in the books at

a. purchase price
b. purchase price plus transaction costs
c. fair value
d. fair value less estimated point of sale costs

5. Biological assets are measured on the balance sheet at

a. purchase price plus transaction costs
b. cost less accumulated depreciation and accumulated impairment losses
 c. fair value
d. fair value less estimated point of sale costs

6. When the fair value of a biological asset cannot be reliably measured,

a. the asset shall be measured at purchase price less estimated point of sale costs
b. the asset shall be measured at cost less accumulated depreciation and impairment losses
c. the asset shall de appraised by an independent appraiser and shall be measured at appraised value
d. the asset shall not be shown on the balance sheet

7. The charge in fair value less estimated point of sale costs of a biological asset shall be
a. ignored
b. shall be taken to profit or loss during the period in which the charge arises
c. shall be taken to equity under the heading comprehensive income
d. shall be 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.

8. 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 point of sale costs\
c. taken to profit or loss at fair vale
d. ignored until actual disposal

9. Agricultural produce held for sale in the ordinary course of business shall be dealt with by the entity in accordance with
a. PAS 2, Inventories
b. PAS 16, Property, plant and equipment
c. PAS 41, Agriculture
d. PFRS 5, Discounted Operations and Non-Current Assets Held for Sale

10. Which of the following statements is incorrect regarding biological assets and agricultural produce?
a. Biological assets whose fair value cannot be determined reliably shall be measured at cost less
accumulated depreciation and impairment cost.
b. Agricultural produce shall be measured at cost less accumulated depreciation and impairment losses,
when its fair value cannot be estimated reliably
c. The price in an active market is considered to be the best basis for determining the fair value of biological
assets and agricultural produce
d. The change in fair value less estimated point of sale costs of biological assets is reported as income or
loss in the income statement in the period in which the change arises

11. Which among the following is not included in point of sale costs?
a. Levies by regulatory authorities
b. Costs of getting the assets to market
c. Transfer taxes and duties
d. Broker’s commission

12. Which of the following is not used as a basis in determining the fair value of biological assets?
a. price in an active market
b. appraised value based on an independent appraisal
c. most recent market transaction price
d. benchmarks of prices within the sector

13. If the fair value of the biological asset, previously measured at cost less accumulated depreciation, becomes reliably
measurable
a. the entity must switch to the fair value less point of sale cost measurement basis, the amount of
adjustment taken to profit or loss
b. the entity must switch to the fair value less point of sale cost measurement basis, the amount of
adjustment taken to equity under the heading “ Revaluation Surplus”
c. The entity must switch to the fair value less point of sale cost measurement basis, the amount of
adjustment taken as an adjustment to the beginning balance of retained earnings
d. the entity must continue to measure the same asset at cost less accumulated depreciation and
impairment losses

14. Which among the following is not a required disclosure for biological assets under PAS 41?
a. The aggregate gain or loss on initial recognition of biological assets and from change in fair value less
estimated point of sale cost
b. Restrictions on title of biological asset held by an entity
c. Number of animals classified as biological assets born during the period
d. Methods and assumptions applied in determining fair value of biological assets.