BIOLOGICAL ASSETS PROF.B.

RAMOS
Key definitions
 Agricultural activity is 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.
 Biological transformation comprises the processes of growth,
degeneration, production, and procreation that cause
qualitative or quantitative changes in a biological asset.
 Biological asset is a living animal or plant.
Agricultural produce should be measured at fair value less costs to
sell at the point of harvest. Because harvested produce is a
marketable commodity, there is no 'measurement reliability'
exception for produce.
A gain on initial recognition of agricultural produce at fair value
should be included in profit or loss for the period in which it arises.
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.

Fair value is the amount for which an asset could be exchanged, or

 Group of biological assets is an aggregation of similar living
a liability settled, between knowledgeable, willing parties in an
animals or plants.
arm’s length transaction.

 Agricultural produce is the harvested product of the entity’s

Costs to sell are the incremental costs directly attributable to the
biological assets.
disposal of an asset, excluding finance costs and income taxes.

 Harvest is the detachment of produce from a biological asset An active market is a market where all the following conditions
or the cessation of a biological asset’s life processes. exist:
(a) the items traded within the market are homogeneous;
 Examples of biological assets, agricultural produce, and (b) willing buyers and sellers can normally be found at any time;
products that are the result of processing after harvest: and
(c) prices are available to the public.
Products that are
the result of How to determine fair value?
Agricultural processing after
Biological assets produce harvest If an active market exists
Sheep Wool Yarn, carpet Quoted market price in that market
Trees in a
plantation forest Felled trees Logs, Lumber If an active market does not exist
Plants Cotton Thread, clothing
a) the most recent market transaction price, provided that there
Harvested cane Sugar has not been a significant change in economic circumstances
Dairy cattle Milk Cheese between the date of that transaction and the end of the
Pigs Carcass Sausages, cured reporting period;
hams b) market prices for similar assets with adjustment to reflect
Bushes Leaf Tea, cured tobacco differences; and
Vines Grapes Wine c) sector benchmarks such as the value of an orchard expressed
per export tray, bushel, or hectare, and the value of cattle
Fruit trees Picked fruit Processed fruit expressed per kilogram of meat.

Recognition If market-determined prices or values are not available

An entity should recognize a biological asset or agriculture produce
when, and only when:
 the entity controls the asset as a result of past events;
 it is probable that future economic benefits will flow to the
entity; and
 the fair value or cost of the asset can be measured reliably.
Present value of expected net cash flows from the asset discounted
at a current market-determined rate
In limited circumstances
Cost is an indicator of fair value, where little biological
transformation has taken place or the impact of biological
transformation on price is not expected to be material

Measurement
Biological assets should be measured on initial recognition and at
subsequent reporting dates at fair value less costs to sell, unless
fair value cannot be reliably measured.
The gain on initial recognition of biological assets at fair value, and
changes in fair value of biological assets during a period, are
reported in profit or loss.
The fair value of an asset is based on its present location and
condition. As a result, for example, the fair value of cattle at a farm
is the price for the cattle in the relevant market less the transport
and other costs of getting the cattle to that market.
The fair value of a biological asset is based on current quoted
market prices and is not adjusted to reflect the actual price in a
binding sale contract that provides for delivery at a future date.