FAR 460

TOPIC 4: BIOLOGICAL ASSET

MFRS 141 AGRICULTURE
 LEARNING OUTCOME
Students are able to:
 DEFINITION
– agriculture-related definitions
– general definitions
 RECOGNITION AND MEASUREMENT
• gains and losses
• inability to measure fair value reliably
 GOVERNMENT GRANT
 DE-RECOGNITION
 DISCLOSURE
• MPERS FOR PRIVATE ENTITIES
 MFRS 141 – AGRICULTURE
EXCEPTION
SCOPE (Para 1)
(Para 2 & 3, Addendum 2)
• Government grant
related to bearer plants
Biological assets, except • Land (MFRS116,
for bearer plants MFRS140) & intangible
assets (MFRS 138)
related to agricultural
Agricultural produce at activity
the point of harvest • Agricultural produce &
processing of
agricultural produce
Government grant after the point of
relating to agricultural harvest (MFRS102)
asset
 DEFINITION
Biological asset
• It is a living animal or plant.

Agricultural produce
• It is the harvested produce of the entity’s biological assets.

A bearer plant is a living plant that:

a) Is use in the production or supply of agricultural produce;
b) Is expected to bear produce for more than one period; and
c) has a remote likelihood of being sold as agricultural produce,
except for incidental scrap sales
**Bearer plants are treated as property, plant and equipment in accordance
with MFRS 116 and are measured at cost less accumulated amortisation
and accumulated impairment loss.
Biological assets Agricultural produce Products that are the result of
processing after harvest

Sheep wool Yarn, carpet

Trees in a timber plantation Felled trees Logs, lumber

Dairy cattle milk Cheese

Pigs carcass Sausage, cured hams

Cotton plants Harvested cotton Thread, clothing

sugarcane Harvested cane Sugar

Tobacco plants Picked leaves Cured tobacco

Tea bushes Picked leaves Tea

Grape vine Picked grapes Wine

Fruits trees Picked fruit Processes fruit

Oil palms Picked fruit Palm oil

Rubber trees Harvested latex Rubber product

 INITIAL RECOGNITION
Biological asset and agricultural produce are recognised only
when: (Para 10)
• The entity has control over the asset as a result of past
events;
• It is probable that economic benefits associated with the
assets will flow to the entity; and
• The cost or fair value can be measured reliably.
 EXAMPLE 1
Lego Farm Bhd was incorporated on 1 January 2013. The company involves
in breeding and selling sheep in the local market but not involved in
slaughtering activities. The sheep are to be sold in their current condition. The
company initially acquired 50 lambs and 70 sheep. The lamb matured into
a sheep after one year.
During the year, movements and transactions of lambs and sheep took
place:

Lamb Sheep
1 January 2013 - -
Acquisition on 1 January 2013 50 70
New born - -
Transformation through growth (from lamb to sheep) (50) 50
Sales during the year - (60)
31 December 2013 - 60
 EXAMPLE 1
The following are the information on the fair value of lambs and sheep and
the cost to sell:
1 January 2013 31 December 2013
RM RM
Fair value per unit (lamb) 2,000 2,100
Fair value per unit (sheep) 3,500 4,000
Costs to sell:
Transportation cost per unit (lamb and 300 350
sheep)
1. Are the lambs and the sheep assets of Lego Farm Bhd?
 The lambs and the sheep are assets that are resources controlled by
Lego Farm Bhd as a result of past events that were acquired through
purchase from which future economic benefits are expected to flow to
it.
 EXAMPLE 1
2. State the classification of the lambs and the sheep.
 The lambs satisfy the definition of biological assets, a living animal in
accordance with MFRS 141 Agriculture, because related to agricultural activity.
The lambs go through biological transformation through the process of growth
into sheep.
 The sheep satisfy the definition of biological assets, a living animal in accordance
with MFRS 141 Agriculture, related to agricultural activity that is breeding
activity.
 Other sheep that are not involve in the breeding activity and are ready for sale
will be classified in accordance to MFRS 102 Inventories.

3. Explain the following terms:

– Agricultural activity - 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
– Agricultural produce - harvested product of the entity’s biological assets.
 EXAMPLE 1
4. On initial recognition, how should the lambs and sheep measured?
 The lambs and sheep as biological assets shall be measured on initial recognition
at the fair value less costs to sell.

5. Compute the initial measurement of the lambs and sheep on 1 January 2013.
Lamb Sheep TOTAL
RM RM
Price at cost
50 X 2,000 100,000
70 X 3,500 245,000 345,000

Less: Costs to sell

50 X 300 (15,000)
70 X 300 (21,000) (36,000)
Fair value less cost to sell 85,000 224,000 309,000
 MEASUREMENT
Biological Assets
• Measured initially and at each reporting date at fair value less costs
to sell. (Para 12)
• Where the fair value cannot be measured reliably initially, the asset
is measured at cost less any accumulated depreciation less any
impairment losses. (Para 30)

Agricultural Produce
• The measurement is fair value less costs to sell at the point of
harvest. (Para 13)

**Cost incurred in the biological transformation

Costs of developing, nurturing, producing and harvesting biological assets
should be charged to expense when incurred.
 Gains and Losses
Biological Asset
• A gain or loss arising on initial recognition of a biological asset
at fair value less cost to sell and from a change in fair value
less cost to sell of a biological asset shall be included in profit
or loss for the period in which it arises. (Para 26)

Agricultural Produce
• A gain or loss arising on initial recognition of agricultural
produce at fair value less costs to sell shall be included in
profit or loss for the period in which it arises. (Para 28)
 EXAMPLE 2
Assume that on 1 January 2016, a calf is born. The estimated fair value
less point-of-sale costs of a-day old calf is RM500. As at 31 December
2016, the calf is about a year old and has an estimated fair value less
estimated point-of-sale costs of RM1,400.

Explain how the gain or loss shall be recognised.

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
1 /1/2016 Dr Biological asset RM500
Cr SOPL – gain on initial recognition of B.A RM500

31/12/2016 Dr Biological asset RM900

Cr SOPL – gain on changes in FV RM900
• In the case of timber cultivation (consumable) no gain or
loss will arise on the initial recognition when an entity first
commences cultivation crop.
• Cost for initial planting stage – expense

• In animal farming, the fair value less cost to sell of the

animals can be estimated directly by reference to active
market prices.
• If the market price of immature animals are not available –
refer to the price of mature animal and make linear pro
rata adjustment.
• Quantity of the animal at the end of the accounting period
– physical count.
 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 fair value less
cost to sell of the 10-hectare timber crop with one-year pulpwood
trees is estimated at RM3,000,000.

Calculate the gain or loss for the crop.

SOPL (extract) for the year ended 31 December 2006

Gain from change in FVLCTS of pulpwood trees RM3,000,000

(3,000,000-0)
Costs of crop development (RM2,000,000)
Profit from plantation operation RM1,000,000
 PHYSICALS AND PRICE CHANGES OF
BIOLOGICAL ASSETS
• Physical changes – are attributable to the
biological transformation which results in
growth, degeneration, production and
procreation of the biological assets.

• Price changes – are unrelated to the physical

changes in the biological assets, but are
attributable to the changes in the per unit fair
value due to market forces
 EXAMPLE 4
ABC Sdn Bhd had provided the following information regarding its livestock
management of its entity:
Date Details RM
1/1/01 20 calves, 2 years old
1/7/01 Bought 5 six month old calves
1/7/02 4 calves born
FV less cost to sell per animal
1/1/01 2 years old 500
1/7/01 6 months old 200
31/12/01 3 years old 800
2 years old 550
1 year old 400
6 months old 300
1/7/02 Newborn 100
31/12/02 4 years old 1,000
3 years old 950
2 years old 650
1 year old 420
6 months old 220
Newborn 140
 EXAMPLE 4
Required:
Calculate the carrying amount and revenue FYE 31 December 2001 and 31 December
2002.

Date RM SOPL (RM) SOFP (RM)

1/1/01
Bal b/d FV (20x500) 10,000
Purchases Cost (5x200) 1,000 11,000
31/12/01 Increase in FVLCTS due to price change
20x(550-500) – 2 years 1,000
5x(300-200) – 6 months 500 1,500
Increase in FVLCTS due to physical change
20x(800-550) – 2 to 3 years 5,000
5x(400-300) – 6months to 1 year 500 5,500 7,000
31/12/01 20x800 (3 years old) 16,000
5x400 (1 year old) 2,000 18,000
 EXAMPLE 4
Date RM SOPL (RM) SOFP (RM)

1/1/02
Bal b/d 18,000
31/12/02 Increase in FVLCTS due to price change
20x(950-800) – 3 years 3,000
5x(420-400) – 1 year 100
4x(140-100) - newborn 160 3,260
Increase in FVLCTS due to physical change
20x(1,000-950) – 3 to 4 years 1,000
5x(650-420) – 1 to 2 years 1,150
4x100 – newborn 400
4x(220-140) – newborn to 6months 320 2,870 6,130
31/12/02 20x1000 (4 years old) 20,000
5x650 (2 years old) 3,250
4x220 (6 months) 880 24,130
 Integrated and Mixed Farming
• For the purpose of applying the fair value model of the
Standards, it is necessary to account for the bearer biological
assets separately from the consumable biological assets.
• Bearer biological assets – eg chilli, tomatoes, cucumbers, etc
• Consumable biological assets – eg green leaf vegetables of
various kinds, carrot, etc
 GOVERNMENT GRANTS

Biological assets measured at fair value less costs to sell

• An unconditional government grant shall be recognized in
profit or loss only when, the government grant becomes
receivables. (Para 34)
• Conditional government grant shall be recognized in profit
and loss only when, the conditions attach to the grant are
met. (Para 35)

Biological assets measured at cost

• MFRS 120 Accounting for Government Grants and Disclosure
of Government Assistance applies. (Para 37)
• Apply MFRS 120 – treat based deferred income or write off
against asset method
PRESENTATION
AND
DISCLOSURE
THANK YOU