Biological Assets

International Accounting Standard 41 (IAS 41) defines biological asset as “a living animal or plant”.
Accounting and financial reporting practices categorize many assets such as property, machines,
equipment, buildings, and other assets. “Biological assets” is one of the categories of assets.
Biological assets include plants and animals. The common examples of biological assets include
animals such as goats, sheep, cows, buffaloes, calves, and fish. Biological assets include plants
such as vegetables, crops, vineyards, trees, and fruit orchards.
The biological assets keep on transforming. They grow, degenerate, and produce. As a result
quantitative or qualitative changes occur in the nature of biological assets. Such changes are known
as biological transformation. The harvested product of changes in the nature of biological assets is
known as agricultural produce. The examples of agricultural produce include milk, mutton, beef,
fruits, coffee beans etc.
Usually biological assets are of primary importance in the farms business. Farm businesses
generate income from its biological assets therefore these biological assets need to be recognized
in balance sheetand the revenues from them also need to be recognized in income statement.
According to IAS 41 the biological assets should be recognized in the balance sheet when the
following criteria are fulfilled:
 The business controls the biological assets because of a past event
 It is probable that the business will get future economic benefits from them
 Fair value or cost of the biological asset can be measured reliably
IAS 41 requires that the biological assets should be recognized at their fair value minus point-of-sale
costs. This method should be used when initially measuring the biological assets and then at the
every balance sheet date.
Agriculture produce should also be measure by using the above method. Agriculture produce should
be measured at the time of harvest.
The fair value of a biological asset is the amount at which it can be sold to a knowledgeable and
willing person or party. Usually this is market value of a biological asset in a relevant and reliable
active market. The point-of-sale costs include broker’s commission, transfer taxes and duties, and
commodity exchanges. Transportation costs are not included in the these costs.
IAS 41 Agriculture sets out the accounti ng for agricultural ac ti vity – the transformati on of biol ogical ass ets (livi ng pl ants and ani mals) i nto agricultur al produce (harves ted product of the entity's bi ological as sets). T he standard g enerall y requir es biol ogical ass ets to be measur ed at fair value l ess costs to sell.
IAS 41 was originall y issued i n D ecember 2000 and first appli ed to annual periods beginning on or after 1 Januar y 2003.
IAS 41 Agriculture sets out the accounti ng for agricultural ac ti vity – the transformati on of biol ogical ass ets (livi ng pl ants and ani mals) i nto agricultur al produce (harves ted product of the entity's bi ological as sets). T he standard g enerall y requir es biol ogical ass ets to be measur ed at fair value l ess costs to sell.
IAS 41 was originall y issued i n D ecember 2000 and first appli ed to annual periods beg inning on or after 1 Januar y 2003.

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