LEARNING OUTCOME

Students are able to:

 Definition
◦ agriculture-related definitions
◦ general definitions

AGRICULTURE  Recognition and measurement

◦ gains and losses
◦ inability to measure fair value reliably

MFRS 141  Government grant

 De-recognition
 Disclosure
◦ MPERS for private entities

Agriculture (Para 1, MFRS 141)

Plantation/
Orchards
In financial accounting and reporting, agriculture is referred to
Vegetable • a) biological assets - such as living plants and animals,
farming, Livestock
except for bearer plants
farming
etc. • b) agricultural produce - such as milk, eggs and
AGRICULTURE latex/rubber
The main issues covered by MFRS 141 are:
• recognition of biological assets and agricultural produce,
• measurement of biological assets and agricultural produce,
Forestry Aquaculture and
• the accounting treatment of the transformation process.
Introduction of BA
Features of Biological Assets
◦ Biological assets (BA) are animals and plants
◦ Farms are a typical business where biological assets are
the primary income.
◦ A business raising animals or crops for profit is required
to keep a record and include them in the financial
statements.
◦ Once a crop is harvested and livestock slaughtered, the
status changes from biological assets to agricultural
produce (AP).
Not Biological Assets
Animals and plants not included as BA are:
a) Dogs, horses, pigeons or other animals
used for racing
b) Animals used in the theme parks, such as
pony rides; and
c) The biologicals categorised as viruses,
bacterias and blood cells
◦The most important distinction is that
BA are non-human.
◦The classification includes mammals,
animals, plants including trees, vineyards,
fruit orchards, vegetables and herbal
crops, and fish.
Significance
◦The purpose of categorizing animals and
plants as BA is to offer a clear picture of
value to the farm or business.
◦The ability to discern the different assets
a business holds may offer clear financial
information.
 MFRS 141: Objective
Covers (para 1)
Objective: ◦ Biological assets, except for
bearer plants.
◦ prescribe the accounting treatment and
disclosures related to agricultural activity. ◦ Agricultural produce at
point of harvest.
Agricultural activity: ◦ Government grants related
Scope
Not cover (para 2 & 3)
◦ Land related to agricultural activity (MFRS116
& MFRS140)
◦ Bearer plants related to agricultural activity
(see MFRS 116)
◦ Government grants related to bearer plants
(see MFRS 120)

◦ 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.
to agriculture ◦ Intangible assets related to agricultural activity
◦ Right-of-use assets arising from a lease of
land related to agricultural activity(MFRS 16
Lease)
◦ Agricultural produce & processing of
agricultural produce after the point of harvest
(MFRS102)

EXAMPLES
 Example on APPLICABLE DEFINITIONS (para 5)
STANDARDS for Oil palm processing
Agricultural activity
Bearer plants Produce growing Finished products - the management by an entity of the biological
(MFRS 116) on bearer plants that are the results transformation and harvest of biological
(MFRS 141) of processing after assets for sale or for conversion into agricultural
harvest (MFRS produce or into additional biological assets.
102)
OIL PALMS PALM FRUITS COOKING OIL Agricultural produce (AP)
(FRESH FRUIT MARGARINE - The harvested produce of the entity’s biological
BUNCHES)
assets
(Source: Akmalia et al., 2019)

DEFINITIONS (para 5) DEFINITIONS (para 5)

◦ A bearer plant is a living plant that:
Biological asset (BA)
- A living animal or plant
◦ (a) is used in the production or supply of agricultural produce;
◦ (b) is expected to bear produce for more than one period; and
A group of BA
◦ (c) has a remote likelihood of being sold as agricultural - An aggregation of similar living animals or plants
produce, except for incidental scrap sales.
 DEFINITIONS (para 5)
Biological Transformation
Biological transformation
- Comprises the process of growth, degeneration, production The biological transformation result in:
& procreation that cause qualitative or quantitative changes
in a BA ◦ Growth
Increase in size, increase in quantity and
improvements in quality.
◦ Procreation/Production
Creation of new additional living plants and
animals.
Cost to sell ◦ Degeneration
- Incremental costs directly attributable to the disposal of an Deterioration in quality or decrease in quantity.
asset, excluding finance costs and income taxes

TYPES OF BIOLOGICAL ASSETS

DEFINITIONS (para 5) CONSUMABLE BIOLOGICAL ASSET BEARER BIOLOGICAL ASSET (BBA)
(CBA)
Those that are to be harvested as Those other than CBA
agricultural produce or sold as BA
Harvest BA that is itself slaughtered or Main criteria
harvested for sale upon reaching its 1. Used in production or supply of
- The detachment of produce from a BA or maturity. agricultural produce
cessation of a BA’s life process 2. Expected to bear produce for > 1
period
3. Has remote likelihood of being sold
as agricultural produce, except for
incidental scrap plants

Also include produce growing on
bearer plants, i.e. agricultural produce
Treated as biological asset or
agricultural produce under MFRS
141
Not AP, rather are held to bear produce
Treated as PPE under MFRS 116 (only
for bearer plants) ; bearer animal still
within MFRS 141
 TYPES OF BIOLOGICAL ASSETS
CONSUMABLE BIOLOGICAL ASSET
(CBA)
Examples :
• livestock intended for the
production of meat,
• livestock held for sale,
• fish in farms,
• crops such as maize and
wheat
BEARER BIOLOGICAL ASSET (BBA)
Examples :,
• livestock from which milk is
produced,
• grape vines, and fruit trees from
which fruit is harvested, and
• trees from which firewood is
harvested while the tree remains.
Bearer biological assets are not
agricultural produce but, rather, are
self-regenerating held to bear produce
Para 5A, 5B & 5C
◦ The following are not bearer plants:
a) plants cultivated to be harvested as agricultural produce (for
example, trees grown for use as lumber);
b) plants cultivated to produce agricultural produce when there is more
than a remote likelihood that the entity will also harvest and sell the
plant as agricultural produce, other than as incidental scrap sales
(for example, trees that are cultivated both for their fruit and their
lumber); and
c) annual crops (for example, maize and wheat).
◦ When bearer plants are no longer used to bear produce they might be
cut down and sold as scrap, for example, for use as firewood. Such
incidental scrap sales would not prevent the plant from satisfying the
definition of a bearer plant.

◦ Produce growing on bearer plants is a biological asset.

BA Accounting Stages of BA
The different stages in the accounting life of a biological
MFRS 116 MFRS 141
asset are shown in the simple diagram below
- Living plant - Both

Bearer BA Living Plant Living Animal Harvest Additional costs

Acquisition Development and initial to complete
of BA Costs recognition of production
- E.g. Palm Tree, process
AP
Rubber tree BBA CBA
e.g. Tomatoes
- bear produce for more Chilies
than one period - bear produce
for less than
- Approach similar to accounting
treatment for a self-constructed item one period
of machinery.

EXAMPLE OF ASSETS
BIOLOGICAL ASSETS – subject to biological transformation
LIVING PLANT
Trees in timber plantation (consumable)
Oil palm (bearer)
Cane trees / sugarcane (bearer)
Paddy, wheat (consumable)
LIVING ANIMAL
Sheep (consumable/bearer)
Pigs (consumable)
Dairy Cattle (bearer)
Fish (consumable / bearer)
Example
1. Land owned by an entity for agricultural activity purposes.
2. Land rented to third party for the purpose of agricultural activity.
3. Natural breeding of animals in zoos and game parks.
4. A managed breeding programme to produce animals for sale.
5. Ocean fishing
6. Fish farming
7. The development of cultures for use in dairy products.

Required:
Banana trees (consumable) Laying hens / layers (bearer)
Which of the above assets can be recognised as agricultural
Tea bushes / tobacco (bearer)
activity?

Solution
1. Land owned by the entity and used for agricultural activity is not
agricultural activity and subject to the recognition and
measurement principles of MFRS116, ‘Property, plant and
equipment‘.
2. Land owned by the entity and rented to the third entity for the
purposes of agricultural activity is the entity’s investment
property and accounted for in accordance with MFRS140,
‘Investment Property’.
3. The natural breeding that takes place is not a managed activity and
is not accounted for in accordance with MFRS141 because it is
incidental to the main activity of providing a recreational facility.
4. A managed breeding programme carried out to produce animals for
sale would be considered as an agricultural activity.

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 RECOGNITION Recognition
Control
An entity shall recognise a biological asset
Evidence of control (eg.)
INITIAL RECOGNITION – PARA 10 – applicable to both or agricultural produce when, and only ◦ Legal ownership
biological asset and agricultural produce when: (para 10) ◦ Branding/marking
◦ Lease
FUTURE ECONOMIC FV OR COST CAN BE - The entity controls the asset as a result of ◦ JV agreement
CONTROL
BENEFITS MEASURED RELIABLY ◦ License/concession
past event;

Para 12, 13, 15, 16, 24, 25, FEB (eg.)

Para 11 Para 11 - It is probable that future economic benefits
30
associated with the assets will flow to the ◦ Physical growth
entity; AND ◦ Weight increase
◦ Age
(Para 11)
INABILITY TO MEASURE FV RELIABLY – Para 30 - FV/Cost of the asset can be measured
reliably

Measurement Gains and losses

Biological assets (Para 12) Agricultural produce (Para
Biological asset (para 26)
◦ The biological assets are 13)
measured initially and at each ◦ A gain or loss arising on initial recognition of a biological asset at fair
◦ At point of harvest - For value less costs to sell and from a change in fair value less costs to
reporting date (subsequent
agricultural produce that are sell of a biological asset.
measurement) at FV less Costs
harvested from the biological
to Sell ◦ Gain or loss on biological asset will arise due to changes in fair value
assets the measurement is = FV
• Dr. BA xx less Costs to sell at the point of (less costs to sell) between Changes in FV can be due to 2 main factors:
1. Physical change
Cr Bank/Payable xx harvest a) reporting dates, and 2. Price change
• Where the fair value cannot be ◦ Costs to sell are the incremental b) initial recognition of a biological asset at fair value (less costs to sell),
measured reliably initially, the costs directly attributable to the for example, when a calf is born.
asset is measured at cost less any disposal of the assets. It does not All these gains and losses are recognized as income in the statement of
accumulated depreciation less any include finance costs and income comprehensive income for the period in which it arises.
impairment losses. (para 30) taxes.
• Dr BA xx
• Cr SOPL (Gain in FV) xx
 Gains and losses
Physical & price changes of BA
Agricultural produce (para 28)

◦ A gain or loss arising on initial recognition of agricultural produce.

◦ The gain or loss is the fair value less costs to sell. Physical changes
◦ The gain or loss is recognized in the statement of comprehensive
income in the period of harvest.
◦ biological transformation resulting in growth,
degeneration & procreation

Price changes
◦change in FV per unit due to market forces

FACTORS TO DETERMINE FV Government grants – para 36-38

– Para 15, 16, 24 & 25
1. GROUPING OF BA OR AP– Para 15
 pricing according to their significant attributes like age or quality.
Grant related to BA
measured at FVLCTS
2. CONTRACT PRICE – Para 16
 FV is determined independently even there was a contract price

3. EXISTENCE OF ACTIVE MARKET Unconditional Conditional

 Based on present condition of the asset
 If no active market – based on recent transactions or market price for similar assets

4. COST APPROXIMATE FV – Para 24 Recognise as Recognise as

 little biological transformation has taken place since initial cost incurrence (for income in P/L incomein P/L If grant is
example, for seedlings planted immediately prior to the end of a reporting period or
newly acquired livestock); when, and only when, and only received before
 the impact of the biological transformation on price is not expected to be material when, grant when, conditions conditions are
(for example, for the initial growth in a 30-year pine plantation production cycle). becomes attached to the met - liability
receivable grant are met
5. BIOLOGICAL ASSETS ATTACHED TO LAND – Para 25
 Use information combined assets to measure FV of BA
 Government grants – para 34-38
Government Grant- example
◦ Grants related to BA measured at cost
A grant may require an entity to farm in a
costs – acc dep - acc impairment
particular location for 5 years and require the
entity to return all of the grant if it farms for a
◦MFRS 120 Accounting for Government Grants & period shorter than 5 years.
Disclosure of Government Assistance
◦Recognise only when there is reasonable assurance
that entity will comply to the conditions attached to
the grant & grant will be received.

Example 1 (pg 1166) Answer

◦ According to MFRS 141, any gain or loss arising on initial
recognition at FVLCTS and from changes in FV shall be
recognised as income/gain in the statement of profit or loss for
the period in which it arises
Assume that on 1 January 2006, a calf is born. The
RM RM
estimated FV less point-of-sale (POS) cost of a-day
1/1/2006 Dr: BA 500
old calf is RM500. As at 31 December 2006, the calf
Cr: SOPL – gain on initial 500
is a about a year old and has an estimated FV less recognition of BA
POS costs of RM1,400. - To recognise gain on initial recognition of BA

31/12/2006 Dr: BA (1,400 – 500) 900

Required: Cr: SOPL – gain on changes in FV 900
Explain how the gain or loss shall be recognised - To recognise gain from a change in
FV of BA
 EXAMPLE 2 EXAMPLE 3
Ladang Sdn Bhd commences cultivation of pulpwood trees, a timber crop on 1 January
2006. Costs (planting materials, labour and other planting costs) incurred in 2006 to
develop a 10-hectare timber crop amounts to RM2,000,000. On 31 December 2006, the Lego Farm Bhd was incorporated on 1 January 2013. The company
fair value less cost to sell of the 10-hectare timber crop with one-year pulpwood trees is
estimated at RM3,000,000.
involves in breeding and selling sheep in the local market but not
Calculate the gain or loss for the crop. involved in slaughtering activities. The sheep are to be sold in their
current condition. The company initially acquired 50 lambs and 70
SOPL (extract) for the year ended 31 December 2006 sheep. The lamb matured into a sheep after one year.
Gain from change in FVLCTS of pulpwood trees RM3,000,000 During the year, movements and transactions of lambs and sheep took
(3,000,000-0) place:
Costs of crop development (RM2,000,000)
Profit from plantation operation RM1,000,000
Lamb Sheep
1/1/20x6 Dr SOPL (crop development expenses) RM2,000,000 1 January 2013 - -
Cr Bank RM2,000,000 Acquisition on 1 January 2013 50 70
- to expense off the development costs
New born - -
31/12/20x6
Dr Biological asset RM3,000,000 Transformation through growth (from lamb to sheep) (50) 50
Cr SoPL (gain) RM3,000,000 Sales during the year - (60)
- to recognise gain from a change in FVLCTS of biological asset 31 December 2013 - 60

EXAMPLE 3 EXAMPLE 3
2. State the classification of the lambs and the sheep.
The following are the information on the fair value of lambs and sheep  The lambs satisfy the definition of biological assets, a living animal in
and the cost to sell: accordance with MFRS 141 Agriculture, because related to agricultural
activity. The lambs go through biological transformation through the
1 January 31 December process of growth into sheep.
2013 2013  The sheep satisfy the definition of biological assets, a living animal in
RM RM accordance with MFRS 141 Agriculture, related to agricultural activity that
Fair value per unit (lamb) 2,000 2,100 is breeding activity.
Fair value per unit (sheep) 3,500 4,000  Other sheep that are not involve in the breeding activity and are ready for
Costs to sell: sale will be classified in accordance to MFRS 102 Inventories.
Transportation cost per unit (lamb and sheep) 300 350
3. Explain the following terms:
1. Are the lambs and the sheep assets of Lego Farm Bhd? ◦ Agricultural activity
◦ - the management by an entity of the biological transformation and harvest
 The lambs and the sheep are assets that are resources controlled of biological assets for sale or for conversion into agricultural produce or
by Lego Farm Bhd as a result of past events that were acquired into additional biological assets
through purchase from which future economic benefits are ◦ Agricultural produce
expected to flow to it. ◦ - harvested product of the entity’s biological assets.
 EXAMPLE 3 EXAMPLE 4
ABC Sdn Bhd had provided the following information regarding its livestock
management of its entity:
4. On initial recognition, how should the lambs and sheep measured?
Date Details RM
The lambs and sheep as biological assets shall be measured on initial
recognition at the fair value less costs to sell. 1/1/01 20 calves, 2 years old
1/7/01 Bought 5 six month old calves
1/7/02 4 calves born
5. Compute the initial measurement of the lambs and sheep on 1 FV less cost to sell per animal
January 2013. 1/1/01 2 years old 500
Lamb Sheep TOTAL 1/7/01 6 months old 200
RM RM 31/12/01 3 years old 800
2 years old 550
Price at cost
1 year old 400
50 X 2,000 100,000 6 months old 300
70 X 3,500 245,000 345,000
1/7/02 Newborn 100
31/12/02 4 years old 1,000
Less: Costs to sell 3 years old 950
50 X 300 (15,000) 2 years old 650
70 X 300 (21,000) (36,000) 1 year old 420
Fair value less cost to sell 85,000 224,000 309,000 6 months old 220
Newborn 140

EXAMPLE 4 EXAMPLE 4
Required:
Date RM SOPL SOFP
Calculate the carrying amount and revenue FYE 31 December 2001 and 31
(RM) (RM)
December 2002.
1/1/02
Date RM SOPL SOFP Bal b/d 18,000
(RM) (RM)
31/12/02 Increase in FVLCTS due to price
1/1/01
change 3,000
Bal b/d FV (20x500) 10,000
20x(950-800) – 3 years 100
Purchases Cost (5x200) 1,000 11,000
5x(420-400) – 1 year 160 3,260
31/12/01 Increase in FVLCTS due to price 4x(140-100) - newborn
change 1,000
20x(550-500) – 2 years 500 1,500 Increase in FVLCTS due to physical
5x(300-200) – 6 months change 1,000
20x(1,000-950) – 3 to 4 years 1,150
Increase in FVLCTS due to
5x(650-420) – 1 to 2 years 400
physical change 5,000
4x100 – newborn 320 2,870 6,130
20x(800-550) – 2 to 3 years 500 5,500 7,000
4x(220-140) – newborn to 6 months
5x(400-300) – 6months to 1 year
31/12/01 20x800 (3 years old) 16,000 31/12/02 20x1000 (4 years old) 20,000
5x400 (1 year old) 2,000 18,000 5x650 (2 years old) 3,250
4x220 (6 months) 880 24,130

Presentation
◦MFRS 101: carrying amount of BA disclosed
separately in SOFP
◦MFRS 141: aggregate gain or loss on initial
recognition of BA & agricultural produce
plus from changes in FV (price and/or
physical changes)
Disclosure
The disclosure requirements include
◦ Gain or loss arising during the current period on initial recognition
of BA and AP and from the change in fair value less costs to sell of
BA
◦ Description of each group of biological assets
◦ Description of the nature of the enterprise’s activities of each group
of biological assets and non-financial measures or estimates of
physical quantities of produce and assets on hand at the end of the
period
◦ Information about biological assets whose title is restricted or
pledged as security
◦ Amount of commitment for development or acquisition of
biological assets
Disclosure –cont. PRESENTATION IN
FINANCIAL STATEMENT
◦ Financial risk management strategies related to agricultural activities XYZ Dairy Bhd
Statement of Profit or Loss for the year ended 31 December xx
◦ Reconciliation of the changes in carrying value of biological assets for the
period, detailing gain or loss in changes in fair value, purchases, decreases Sales/FV of Agriculture produce
due to sale and/or harvest, business combinations and foreign exchange
differences Changes in FV due to price / physical
change
◦ For biological assets carried at cost less accumulated depreciation less
impairment loss
◦ Description of the assets
◦ Explanation for not using fair value measurement
Related operating expenses
◦ Range of fair value within which likely to fall, if possible
◦ Depreciation method, useful life or depreciation rates and
◦ Gross carrying amounts and accumulated depreciation
◦ Details of Government grants such as nature of grant, amount
recognised, unfulfilled conditions etc

PRESENTATION IN PRESENTATION IN
FINANCIAL STATEMENT FINANCIAL STATEMENT
XYZ Dairy Bhd (Notes): Reconciliation of carrying amounts of dairy livestock
Statement of Financial Position as at 31 December xx

39,930 –
Biological asset as NCA in SOPL
in SOFP