Financial Accounting and Reporting: AGRICULTURE

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RELATED STANDARD: PAS 41
SCOPE
PAS 41 shall be applied to account for the following when they relate to agricultural activity:
I. biological assets;
-living animal and plant
II. agricultural produce at the point of harvest; and
-harvested products of the entity’s biological asset
III. government grants related to biological assets
Inapplicability of PAS 41
(a) Agricultural produce after the point of harvest (PAS 02 Inventories)
(b) Land related to agricultural activity (see PAS 16 Property, Plant and Equipment, PAS 17 Leases and PAS 40
Investment Property); and
(c) Intangible assets related to agricultural activity (see PAS 38 Intangible Assets).
(d) Agricultural activity that is not managed, such as ocean fishing or deforestation
AGRICULTURAL ACTIVITY
Agricultural activity covers a diverse range of activities; for example
 raising livestock
 forestry
 annual or perennial cropping
 cultivating orchards and plantations
 floriculture
 aquaculture (including fish farming)
Certain common features exist within this diversity:
a. Capability to change. Living animals and plants are capable of biological transformation;
b. Management of change. Management facilitates biological transformation by enhancing, or at least stabilizing,
conditions necessary for the process to take place (for example, nutrient levels, moisture, temperature, fertility,
and light).
Harvesting from unmanaged sources (such as ocean fishing and deforestation) is not agricultural activity; and
c. Measurement of change. The change in quality (for example, genetic merit, density, ripeness, fat cover, protein
content, and fiber strength) or quantity (for example, progeny, weight, cubic meters, fiber length or diameter, and
number of buds) brought about by biological transformation or harvest is measured and monitored as a routine
management function.
BIOLOGICAL TRANSFORMATION
Biological transformation results in the following types of outcomes:
a. asset changes through the following:
i. growth (an increase in quantity or improvement in quality of an animal or plant)
ii. degeneration (a decrease in the quantity or deterioration in quality of an animal or plant)
iii. procreation (creation of additional living animals or plants); or
b. production of agricultural produce such as latex, tea leaf, wool, and milk.

Bearer Plants – living plant that is used in the production of agricultural produce
is expected to bear, produce for more than one period
has a remote likelihood of being sold as agricultural produce, except for incidental
scrap sales.
Cost to Sell – cost directly attributable to the disposal of an asset, excluding financial cost and income taxes.
Example: broker’s commission, taxes imposed by the Government, transfer taxes and duties.

Journal Entries:

Acquisition of Biological Assets

Biological Assets (FV less Cost to Sell) xxx
Expenses – Initial Recognition xxx
Cash (Purchase Price & Other Cost) xxx

Subsequent
Biological Asset (FV less Cost to Sell) xxx
Income – Change in FV of Biological Asset due
Price Change or Physical Change xxx

FAR by Raymund Francis A. Escala, MBA, CPA Page 1 of 9

Financial Accounting and Reporting: AGRICULTURE

Biological assets Agricultural produce Products – result of processing

1 Grain (crop) Cereal, straw Flour
2 Sugar beetroots (crop) Sugar beetroots Sugar
3 Flax Straw Fibre, threads, fabrics
4 Perennial grass, meadows Grass, hay, haylage, silage Grass flour
5 Fruit trees, berry-bearing bushes Picked fruit, berries Wine, juice, jam
Pasteurised milk, cheese, sour
cream, cottage cheese, butter,
6 Dairy cattle Milk cheese
7 Pigs, livestock Carcass Sausages
8 Sheep Wool Yarn, carpets
9 Bees Honey, wax Candles, “Midus”
10 Mushrooms Picked mushrooms Conserved, dried mushrooms
11 Fish Fry, fish Smoked fish, tinned fish
12 Furry animals Fur Fur coats

Biological Assets Agricultural Produce Products-Result of

Processing
Sheep Wool Yarn, Carpet
Trees in Plantation Forests Logs Lumber
Plants Cotton Tread, Clothing
Dairy Cattle Harvested Cane Sugar, Cheese
Pigs Milk Sausage, Teas
Bushes Carcass Cured Tobacco
Vines Leaf Wine
Fruit Trees Grapes Processed Fruits
Picked Fruit

PROBLEM 1 CLASSIFICATION

An entity provided the following assets:

Answer
Freestanding trees P 2,500,000 Biological Asset, IAS 41
Land under trees 600,000 Property, Plant, and Equipment, IAS 16
Roads in forests 500,000 Property, Plant, and Equipment, IAS 16
Animals related to recreational activities 1,000,000 Property, Plant, and Equipment, IAS 16
Bearer animals 1,200,000 Biological Asset, IAS 41
Bearer Plants 1,100,000 Property, Plant and Equipment, IAS 16
Agricultural produce growing on bearer
plants 400,000 Agricultural Produce (Inventory)
Agricultural produce harvested 500,000 Agricultural Produce (Inventory)

Required: Determine the amount to be classified as biological assets and as property, plant, and equipment.

PROBLEM 2 CLASSIFICATION
Below are list of assets taken from the records of AAA Co.
Sheep 120,000 Biological Asset
Wool 130,000 Agricultural Produce
Yarn, carpet 45,000 Inventories(Product –result of processing)
Trees in a plantation forest 1,765,000 Biological Asset
Felled trees 356,000 Agricultural Produce
Lumber 780,000 Inventories (Product-result of Processing)
Plants 890,000 Biological Asset
Cotton 55,000 Agricultural Produce
Harvested cane 12,000 Agricultural Produce
Thread, clothing 10,000 Inventories (Product – result of processing)
Sugar 45,000 Inventories (Product – result of processing)
Dairy cattle 120,000 Biological Asset
Milk 45,000 Agricultural Produce
Cheese 35,000 Inventories (Product – result of processing)

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Financial Accounting and Reporting: AGRICULTURE

Pigs 1,665,000 Biological Asset

Carcass 325,000 Agricultural Produce
Sausages, cured hams 13,000 Inventories (Product – result of processing)
Bushes 45,000 Biological Asset
Leaf 95,000 Agricultural produce
Tea, cured tobacco 70,000 Inventories (Product – result of processing)
Vines 105,000 Biological Asset
Grapes 125,000 Agricultural produce
Fruit trees 800,000 Biological Asset
Picked fruit 72,000 Agricultural produce
Diseased pigs 45,000 Decrease in Biological Asset (Loss)
Processed fruit 80,000 Inventories (Product – result of processing)
Wooden barrels 75,000 Inventories (Product – result of processing)

Required: Determine the amount to be classified as agricultural produce and as Inventories.

PROBLEM 2 MEASUREMENT
You were given the following information:
Estimated selling price P 10,000
Commission to brokers 1,000
Transportation and other necessary cost 500
Levies by regulatory agencies and commodity exchanges 300
Transfer taxes and duties 200
Advertising costs 100
Required: Determine the amount of fair value less cost to sell.
10,000 – 1,000 – 300- 200 = P8,500

PROBLEM 3 GAINS AND LOSSES – Initial recognition

The following pertains to transactions affecting the agricultural activity of AAA Company.
a. On January 1, of the current year, AAA Company acquired a two-year old, biological asset at its fair value of
P10,000. The costs to sell the biological asset amounted to P1,000.
b. On April 1, of the current year, AAA Company’s goat gave birth to two kids. The fair value less cost to sell is
P9,000 per kid.
c. On April 1, of the current year, AAA Company harvested ripe strawberries from its farm in La Trinidad,
Benguet. The fair value less cost to sell is P10,000. Labor on harvesting amounted to P1,000.
Requirement: Prepare the necessary journal entry/ (ies) for each of the illustration above.
a. Biological Asset (10,000-1,000) 9,000
Cash/Accounts payable 9,000

b. Biological Asset (2xP9,000) 18,000

Income-Change in FV less cost to sell due
to Physical Change 18,000

c. Agricultural Produce (Inventories) 10,000

Harvest expense 1,000
Income- Agricultural Harvest 10,000
Cash/Accrued Salaries 1,000

PROBLEM 4 GAINS AND LOSSES – Subsequent reporting

A group of twenty 2-year old cattle was held at January 1, 2013. On January 2, 2013, five calves were born and five
two-year old cattle were purchased for P12,000 each. No cows or calves were disposed of during the period. Per unit
fair values less estimated point of sale (POS) costs were as follows:
January 1, 2013
2 year old cattle P12,000
New born cattle 4,000
December 31, 2013
2 year old cattle 13,000
3 year old cattle 15,000
1 year old cattle 7,000
New born cattle 5,000
The company records separately the increase in fair value less POS cost due to physical change and change in fair
value less POS due to price change.
Required:
1. How much shall be taken to income statement as a gain arising from change in fair value due to physical change?
P40,000 + P10,000 + P10,000 = P60,000
2. What amount shall be presented on the statement of financial position on December 31, 2013 under the caption
Biological Assets?
Biological Asset, 1/1/2013; 1/2/2013 (240,000 + 20,000 +60,000) P 320,000
+ Change in FV Less Cost to Sell Due to Physical Change 60,000
+ Change in FV Less Cost to Sell Due to Price Change(20,000+5,000+5,000) 30,000
---------------
Biological Asset, 12/31/2013 P 410,000
========
Or December 31, 2013 FV Less Cost to Sell (P300,000+P35,000+P75,000) P 410,000
========

FAR by Raymund Francis A. Escala, MBA, CPA Page 3 of 9

Financial Accounting and Reporting: AGRICULTURE

Supporting Computations

January 1, 2013 (Old Cattle)

2 yr old, 20 x P12,000 = P240,000 )
December 31, 2013 ) P20,000 Price Change
2 yr old, 20 x P13,000 = P260,000 )
December 31, 2013 ) P40,000 Physical Change
3 yr old, 20 x P15,000 = P300,000 )
January 2, 2013 (Born Five Calves)
0 yr old, 5 x P4,000 = P 20,000 )
December 31, 2013 ) P5,000 Price Change
0 yr old, 5 x P5,000 = P 25,000 )
December 31, 2013 ) P10,000 Physical Change
1 yr old, 5 x P7,000 = P 35,000 )

January 2, 2013 (Purchased five two-year old cattle at P12,000)

2 yr old, 5 x P12,000 = P 60,000 )
December 31, 2013 ) P5,000 Price Change
2 yr old, 5 x P13,000 = P 65,000 )
December 31, 2013 ) P10,000 Physical Change
3 yr old, 5 x P15,000 = P75,000 )

PROBLEM 5 GAINS AND LOSSES – Subsequent reporting

On January 1, 2013, KKK Co. has ten 2-year old dairy cattle with per unit FVLCS of P10,000 or a total of P100,000.
Transactions during the year were:
 One animal aged 2.5 years was purchased on July 1, 2013 for P10,800.
 One animal was born on July 1, 2013.
 Two animals from the January 1, 2013 biological assets were sold for P12,000 each on Sept. 1, 2013.
 One animal from January 1, 2013 biological assets died of “mad cow” disease on November 1, 2013.
Per-unit fair values less costs to sell are as follow:
Newborn animal at July 1, 2013 P 7,000
2.5 year old animal at July 1, 2013 10,800
Newborn animal at 31 December 2013 7,200
0.5 year old animal at 31 December 2013 8,000
2 year old animal at 31 December 2013 10,500
2.5 year old animal at 31 December 2013 11,100
3 year old animal at 31 December 2013 12,000
Required:
1. How much is the change in FVLCS attributable to price change?
P3,500 + P300 + P200 = P4,000
2. How much is the change in FVLCS attributable to physical change?
P10,500 + P900 + P800 = P12,200
Reconciliation:
Biological Assets , 1/1/2013 P 100,000
July 1, 2013 Purchased 2.5 yr old animal ( 1 x P10,800) 10,800
July 1, 2103, new born animal (1 x P7,000) 7,000
Sept 1, 2013, Sold two animal coming from Jan 1, 2013 ( (2 x P10,000) ( 20,000)
Nov. 1, 2013, died one animal ( 1 x P10,000) ( 10,000)
Change in FV less Cost to Sell due to price Change 4,000
Change in FV less Cost to Sell due to Physical Change 12,200
---------------
Biological Assets, 12/31/2013 P 104,000
========

Or December 31, 2013 FV Less Cost to Sell (P84,000 + P12,000 + P8,000) P 104,000
=======

Supporting Computations
January 1, 2013 (Old dairy cattle)
2 yr old, (10-2-1) x P10,000 = P 70,000)
December 31, 2013 ) P3,500 Price Change
2 yr old, 7 x P10,500 = P 73,500 )
December 31, 2013 ) P10,500 Physical Change
3 yr old, 7 x P12,000 = P 84,000 )
July 1, 2013 (Purchased one animal)
2.5 yr old, 1 XP10,800 = P10,800 )
December 31, 2013 ) P 300 Price Change
2.5 yr old, 1 x P11,100 = P11,100 )
December 31, 2013 ) P 900 Physical Change
3 yr old, 1 x P12,000 = P12,000 )
July 1, 2013 (Born one animal)
0 yr old, 1 x P7,000 = P7,000 )
December 31, 2013 ) P200 Price Change
0 yr old, 1 x P7,200 = P7,200 )
December 31, 2013 ) P800 Physical Change
.5 yr old, 1 x P 8,000 = P8,000 )

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Financial Accounting and Reporting: AGRICULTURE

GOVERNMENT GRANTS RELATED TO BIOLOGICAL ASSETS

Category Characteristics Measurement
Conditional In case of non- Deferred – entire amount
compliance, entire grant and recognized as income
will be returned when conditions are met

Grant allow portion of it Deferred and will be

to be retained according amortized over the
to the time lapsed required period

------------------------------------------------------------------------------------------------------------

Unconditional Grant has become Income - entire receivable

receivable amount

Other issues
 If the asset is carried on a cost basis, PAS 20 Accounting for Government Grants and Disclosure of Government
Assistance, is applied:
 Treat the grant as deferred income, or
Recognizes the grant as deferred income that is recognized in profit or loss on a systematic basis over the
useful life of the asset.
 Deduct the grant from the carrying amount of the asset
Deducts the grant in calculating the carrying amount of the asset. The grant is recognized in profit or loss
over the life of a depreciable asset as a reduced depreciation expense.
 Government grants recognized during the period should be separately identified and any unfulfilled conditions
attaching to such grants should be explained.
 An indication should be given in the financial statements where there is expected to be a decrease in the amount
of government grants receivable in future periods.

Disclosures of Government Grants

 Disclosures relating to government grants include the nature and extent of grants, unfulfilled conditions, and
significant decreases in the expected level of grants
1. On January 20, 2013, AAA Corporation, in coordination with DENR, DOST and BOC, was granted by municipal
government a facility used in the importation, domestication and selling of ostriches. Live ostriches as well as
their meat and eggs will be sold by AAA Corporation to the public. The biological assets will be held at fair market
value less estimated point-of-sale costs. Assuming the fair market value of such grant is P360,000 and becomes
receivable immediately, how much income will be recognized by AAA Corporation of year 2013?
a. The fair value will be amortized to profit or loss using the expected life of the facility.
b. The fair value will not be amortized but tested for impairment at least annually
c. 360,000
d. Zero
2. On July 1, 2013, BBB Company was granted by the municipal government assistance to be used in planting
American evergreen trees. This certain tree has small yellowish flowers followed by fleshy pods with many seeds
that bears cacao. Cacao beans are dried, partly fermented, powdered ground and roasted in order to produce a
raw material for the production of chocolates. Such grant will become receivable beginning January 1, 2014. If
the grant has a fair value of P500,000, how much income will be recognized by BBB Company in year 2013?
a. 500,000
b. Zero
c. The fair value will not be amortized but tested for impairment at least annually
d. The fair value will be amortized to profit or loss using the expected number of years cash flow from the grant
is received
Use the following to answer the next four questions
On January 1, 2008, DDD was granted by the El Nido Government a one-hectare seabed to farm “plankton”, a secret
recipe in making “Crabby Patties”. This grant, however, requires DDD to operate its business only within El Nido for
eight years. If within eight years, should DDD extends its operations beyond El Nido, DDD must return the
government grant taking into consideration the portion retained based on the passage of time. The grant is
immediately exercisable. The following information relates to the projected income to be derived from this grant:
Earnings Before
Year Adjustments for Taxes
2008 P 1,200,000
2009 1,350,000
2010 1,400,000
2011 1,850,000
2012 2,250,000
2013 2,850,000
2014 1,950,000
2015 1,350,000
If the value of the grant received is P800,000 and DDD is subject to a corporate income tax rate of 35%.

1/1/2008 Land 800,000

Deferred Income 800,000
12/21/2008 Deferred income 67,600
Income from Government Grant 67,600
800,000 x 8.45% = 67,600

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Financial Accounting and Reporting: AGRICULTURE

12/31/2015 Deferred Income 76,080

Income from Government Grant 76,080
800,000 x 9.51% = 76,080

Earnings Before Adjustments % Net of Net Income

Year for Taxes Taxes After Tax Percentage
2008 1,200,000 65% 780,000 8.45
2009 1,350,000 65% 877,500 9.51
2010 1,400,000 65% 910,000 9.86
2011 1,850,000 65% 1,202,500 13.03
2012 2,250,000 65% 1,462,500 15.85
2013 2,850,000 65% 1,852,500 20.06
2014 1,950,000 65% 1,267,500 13.73
2015 1,350,000 65% 877,500 9.51

3. How much income from government grant will be recognized in 2008?

a. Zero b. 67,606 c. 100,000 d. 800,000
4. How much income from government grant will be recognized in 2015?
a. Zero b. 76,056 c. 100,000 d. 800,000
5. Assuming DDD complied with the agreement, how much income from government grant will be recognized in
2016?
a. Zero b. 76,056 c. 100,000 d. 800,000
Use the following to answer the next two questions
EEE was granted by the City of Puerto Princesa a 3-hectare coral bed to domesticate wild jelly fish in the condition
that EEE must only farm within the City’s limits for five years and return whatever jelly fish the company has if within
the time limit EEE will cease its operations.
6. If the grant was immediately receivable and that its fair value is P320,000, how much will EEE recognize as
income in the year of grant?
a. 320,000
b. 64,000
c. Zero
d. The fair value will not be amortized but tested for impairment at least annually
7. In the immediately preceding item, how much will EEE recognize as income in its sixth year of operations?
a. 320,000
b. 64,000
c. Zero
d. The fair value will not be amortized but tested for impairment at least annually

SELF-TEST QUIZZERS
PROBLEM SOLVING
1. DDD Company is estimating the amount to which its biological assets with cost and market price of P830,000 and
P940,000, respectively, will be reported in the Statement of Financial Position. You were given the following
information:
Necessary costs of getting such biological assets to the market P 35,000
Commissions to brokers 12,000
Levies by the local government relating to the sale 30,000
Transfer taxes 12,000
How much is the estimated cost to sell? 12,000 + 30,000 + 12,000 = 54,000
a. 89,000 b. 77,000 c. 54,000 d. 42,000
2. EEE Farm has a herd of cattle recognized as asset in its book at historical cost of P8,000,000. The market price of
such assets in the slaughter house is P9,500,000. The cost of transporting such assets to the market is P40,000;
other costs of getting the horde to the market amount to P15,000. Commissions to brokers and dealers relating
to the sale of such assets amount to P50,000 and levies by regulatory agencies and commodity exchanges, and
transfer taxes and duties amount to P60,000. What is the fair value of the asset of EEE Farm?
a. 9,500,000 b. 9,445,000 c. 9,390,000 d. 9,335,000
9,500,000 -40,000 – 15,000 = 9,445,000
3. FFF is contemplating on obtaining additional financing in order to expand its poultry business. The bank requires
FFF to submit a Statement of Condition prepared under current GAAP as a prerequisite for the approval of its loan
application. FFF’s biological assets has a total cost of P100,000, however, it was estimated based on current
market prices that the fair market value of FFF’s assets amounted to P120,000. Cost to transport such assets to
the market amounted to P5,000, inclusive of 10% commissions to brokers. An additional P1,000 will be levied by
regulatory agencies and commodities exchanges if the assets were sold. Also, 5% of the estimated selling price
will be levied as transfer tax and duties.
How much would be shown as biological assets in the financial statement of FFF’s business?
a. 109,725 b. 109,000 c. 108,000 d. 100,000
120,000 – (120,000 X 10%) = 108,000
4. GGG Co. is being audited for the first time by CPAs Co. The company accountant is preparing the company’s
financial statements for the first year of operations. An asset is appropriately classified as biological asset,
however, it was valued at its original purchase price. Based on existing contract price, the value of the asset is
P125,000. The value of such asset in which buyers and sellers are willing to transact is P150,000. Cost to sell the
assets is estimated at P10,000. The company’s biological asset should be valued at
a. 115,000 b. 140,000 c. 150,000 d. Either a or b
150,000 – 10,000 = 140,000

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Financial Accounting and Reporting: AGRICULTURE
5. Three years ago CCC Co. bought a biological asset at a total cost of P25,000. On July 1, 2013, this biological
asset gave birth to a colt. Costs incurred as a result of the procreation amounted to P6,000. There is no reliable
estimate of the colt’s fair market value. Such colt should be valued, on initial recognition, at
a. 31,000 b. 25,000 c. 6,000 d. Zero with disclosure
6. A biological asset in HHH Co’s books is carried at a historical cost of P500,000. This asset is being traded in active
markets. The quoted prices in such markets are P510,000, P520,000 and P525,000 respectively. HHH Co. is
contemplating on transacting in the second active market. How much would be the carrying amount of the asset
on year-end financial statements?
a. 525,000 b. 520,000 c. 510,000 d. 500,000

7. Taken from the records of III Co. are the following:

Cost Fair Value
Biological Assets
2012 P 18,000 P 21,000
2013 20,000 23,000
Costs to sell were estimated at P1,000 and P800 in 2012 and 2013, respectively. How much gain will be
recognized in III’s 2013 income statement?
a. 3,000 b. 2,200 c. 2,000 d. 1,800
(P23,000 – P800) – P20,000 = P2,200
Use the following to answer the next two questions
The following information are made available by JJJ Farms, of its dairy livestock:
Carrying amount, January 1, 2013 P 450,000
FV less point of sale costs of livestock purchased during the period 250,000
Increase in FV less estimated point of sale cost attributable to physical changes 220,000
Increase in FV less estimated point of sale costs attributable to price change 64,000
Total selling price less point of sale costs of livestock sold during the period 290,000
8. At what amount should biological assets be carried on the statement of financial position at December 31, 2013?
a. 1,274,000 b. 764,000 c. 694,000 d. 630,000
450,000 + 250,000 +220,000 +64,000 – 290,000 = 694,000
9. Use the same information in JJJ Farms Information, what amount shall be included in gross income of JJJ Farms as
a result of the transaction on its dairy livestock?
a. 64,000 b. 220,000 c. 284,000 d. 290,000
220,000 + 64,000 = 284,000 ( Income due to Price Change and Physical Change)
10. The following assets stated at historical costs were held by LLL Co.
2013 2012
Pigs P 560,000 P 450,000
Honey cured Ham 240,000 190,000
Maple leaf smoked bacon 380,000 420,000
Dairy livestock – immature 450,000 370,000
Dairy livestock – mature 720,000 860,000
Chicken Dung 230,000 30,000
Carcass 430,000 450,000
Salted Meat 1,200,000 1,000,000
Burned Chicken for sale 890,000 920,000
Roasted pigs 360,000 420,000
Bushes 380,000 130,000
If the market values of such assets were at 98% and 101% on December 31 2012 and 2013 respectively and
there are no purchases of biological assets during 2013, how much income arising from the change in market
values of biological assets will be recognized on December 31, 2013?
a. 360,200 b. 357,300 c. 350,600 d. 239,700
THEORETICAL QUIZZERS
1. Which of the following appropriately describes agricultural activity?
a. It is the management by an entity of the biological transformation of biological assets for sale, into
agricultural produce, or into additional biological assets.
b. It comprises the processes of growth, degeneration, production, and procreation that cause qualitative or
quantitative changes in a biological asset.
c. It is the harvested product of the entity’s biological assets.
d. Is a living animal or plant.
2. Agricultural activity includes all of the following, except
a. Raising livestock c. Cultivating orchards and plantations
b. Forestry d. Ocean fishing
3. Agricultural activity includes all of the following, except
a. Annual or perennial cropping c. Aquaculture (including fish farming)
b. Floriculture d. Animal hunting
4. Which of the following statements in relation to common features of an agricultural activity is correct?
I. Capability to change. Living animals and plants are capable of biological transformation
II. Management of change. Management facilitates biological transformation by enhancing, or at least stabilizing,
conditions necessary for the process to take place. Such management distinguishes agricultural activity from
other activities.
III. Measurement of change. The change in quality brought about by biological transformation or harvest is
measured and monitored as a routine management function.
a. I only b. I and II only c. II and III only d. I, II and III

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Financial Accounting and Reporting: AGRICULTURE
5. Which of the following is not dealt with by PAS 41?
a. The accounting for biological assets.
b. The processing of agricultural produce after harvesting.
c. The accounting treatment of government grants received in respect of biological assets.
d. The initial measurement of agricultural produce harvested from the entity’s biological assets.
6. Which of the following is not covered under PAS 41?
a. Dairy cattle c. Unmanaged deforestation activities
b. Wool at the point of harvest d. A government grant to grow 100,000 tons of banana
7. Which item in the list below is covered by PAS 41?
a. Mineral rights
b. Ocean fishing for tuna
c. The land on which an olive grower's olive trees reside
d. Financial assistance from the government in the form of a grant to grow soybeans
8. Statement 1: Procreation is the creation of additional living animals or plants
Statement 2: Growth is the increase in quantity or improvement in quality of an animal or plant
Statement 3: Degeneration is the decrease in the quantity or deterioration in quality of an animal or plant
a. Only one statement is correct c. All statements are correct
b. Only two statements are correct d. All statements are incorrect
9. It is the detachment of produce from a biological asset or the cessation of a biological asset’s life processes.
a. Harvest b. Planting c. Sowing d. Agriculture
10. It is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
a. Fair value b. Cost to sell c. Market price d. Fair value less cost to sell
11. Costs to sell are incremental costs directly attributable to the disposal of an asset. Costs to sell include all of the
following except
a. Commissions to brokers and dealers
b. Levies by regulatory agencies and commodity exchanges
c. Transfer taxes and duties
d. Finance costs, Income taxes and other costs necessary to get assets to a market
12. According to PAS41 Agriculture, which of the following would be classified as a product that is the result of
processing after harvest?
a. Cotton b. Wool c. Bananas d. Cheese
13. Which of the following is not an example of a biological asset
a. Trees in a plantation b. Dairy cattle c. Fruit juice d. Fruit trees
14. Which of the following statements in relation to recognition of biological asset is correct? An enterprise should
recognize a biological asset or agriculture produce only when
I. the entity controls the asset as a result of past events
II. it is probable that future economic benefits will flow to the enterprise
III. the fair value or cost of the asset can be measured reliably.
a. I only b. II only c. Both I and II d. I, II and III
15. Which of the following statements in relation to agricultural produce is correct?
I. In all cases, an entity shall measure agricultural produce at the point of harvest at fair value less cost to sell.
II. PAS 41 reflects the view that the fair value of agricultural produce at the point of harvest can always be
measured reliably.
a. I only b. II only c. Both I and II d. Neither I nor II
16. Biological assets during the period of growth degeneration, production and procreation are measured initial
recognition and every balance sheet at
a. Fair value c. Fair value less costs to sell
b. Purchase price d. Purchase price plus transaction cost
17. An entity owns a number of herds of cattle. The changes in the fair value of the herd should be recognized in
a. Profit or loss only c. Profit or loss or other comprehensive income
b. Other comprehensive income only d. The statement of cash flows only
18. An active market is a market where all of the following conditions exist, except
a. Willing buyers and sellers can normally be found at any time.
b. Prices are available to the public.
c. The items traded are homogeneous.
d. The items traded are heterogeneous.
19. Which of the following values is unlikely to be used in fair value measurement?
a. External independent valuation
b. Quoted market price in a market
c. The most recent market transaction price
d. The present value of the expected net cash flows from the assets
20. Where the fair value of the biological asset cannot be determined reliably, the biological asset should be measured
at
a. Cost
b. Net realizable value
c. Cost less accumulated depreciation
d. Cost less accumulated depreciation and accumulated impairment losses

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Financial Accounting and Reporting: AGRICULTURE
21. An unconditional government grant related to a biological asset that has been measured at fair value less point of
sale cost should be recognized as
a. Income when the grant becomes receivable
b. A deferred credit when the grant has been approved
c. A deferred credit when the grant becomes receivable
d. Income when the grant application has been submitted
22. An unconditional government grant related to a biological asset that has been measured at fair value less cost to
sell shall be recognized as
a. Income when the grant becomes receivable.
b. A deferred credit when the grant becomes receivable.
c. Income when the grant application has been submitted.
d. A deferred credit when the grant has been approved.
23. If a government grant related to a biological asset is conditional on certain events, the grant shall be recognized
as
a. Income when the conditions attaching to the grant are met.
b. Income when the grant has been approved.
c. A deferred credit when the conditions attached to the government grant are met.
d. A deferred credit when the grant is approved.
24. When there is a production cycle of more than one year, PAS 41 encourages separate disclosure of the
a. Total change in value
b. Physical change only
c. Price change only
d. Physical change and price change
25. Which of the following information should be disclosed under PAS 41?
a. There is no requirement in the Standard to disclose separately any gains or losses
b. Separate disclosure of the gain or loss relating to biological assets and agricultural produce
c. The total gain or loss from biological assets, agricultural produce, and from changes in fair value less
estimated point-of-sale costs of biological assets.
d. The aggregate gain or loss arising on the initial recognition of biological assets and the change in
fair value less estimated point-of sale costs of biological assets.
26. If the fair value of the biological asset, previously measured at cost less accumulated depreciation and
accumulated impairment losses, becomes reliably measurable
a. The entity must continue to measure the same asset at cost less accumulated depreciation and impairment
losses.
b. The entity must switch to fair value less cost to sell cost measurement basis, the amount of
adjustment taken to profit or loss.
c. The entity must switch to the fair value less cost to sell cost measurement basis, the amount of adjustment
taken to equity under the heading “Revaluation surplus”.
d. The entity must switch to the fair value less cost to sell cost measurement basis, the amount of adjustment
taken as an adjustment to the beginning balance of retained earnings.
27. Land that is related to agricultural activity is measured
a. At fair value
b. In accordance with PAS 16, Property, Plant and Equipment, or PAS 40 Investment Property
c. At fair value in combination with the biological asset that has been grown on the land
d. At the resale value separate from the biological asset that has been grown on the land.
28. Are those that are to be harvested as agricultural produce or sold as biological assets.
a. Consumable biological assets c. Either consumable or bearer biological assets
b. Bearer biological assets d. Neither consumable or bearer biological assets
29. The following are examples of consumable biological assets, except
a. fruit trees c. livestock held for sale
b. fish in farms d. livestock intended for the production of meat
30. The following are examples of bearer biological assets, except
a. Crops such as maize and wheat, and trees being grown for lumber
b. Trees from which firewood is harvested while the tree remains
c. Livestock from which milk is produced
d. Grape vines
Suggested answers: Problem solving (cbcbd bbccb); Theories (adddb cdcaa ddcdc cadad aaadd bbaaa)
“Great people go through the great challenges to prepare them for greatness in their lives. Our
humbleness will swing us above all our great challenges to a place where great, true success meets our
humbleness."

 -- END OF HANDOUT -- 

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