LECTURE 1/4 : MFRS 141/ IAS 41 AGRICULTURE (BIOLOGICAL ASSETS) : FAR320 TOPIC 2 - PART 1

Summary

This lecture delves into the intricacies of agricultural accounting, focusing on International Accounting Standards 41. It defines agricultural and biological assets, emphasizing their living nature, and discusses their initial and subsequent measurement, primarily at fair value. The lecture explores the transformation of biological assets into agricultural produce, the importance of management in agricultural activities, and the distinction between consumable and non-consumable biological assets. Examples of various agricultural activities, such as dairy farming and forestry, are provided to illustrate the concepts.

Takeaways

• 🌱 Agricultural assets refer to living animals and plants.
• 📈 Agricultural activity involves the transformation of biological assets.
• 💰 Initial measurement of agricultural assets is typically done at fair value.
• 🌾 Biological assets include animals and plants managed by an entity.
• 🛠️ Fair value measurement is preferred unless it cannot be reliably measured.
• 📉 Agricultural produce is the harvested product of biological assets.
• 🐄 Dairy cows and other livestock are examples of biological assets.
• 🌳 Timber from forestry activities is considered agricultural produce.
• 🍇 Grapes from vineyards and other fruits are examples of agricultural produce.
• 🧮 Relevant accounting entries are needed for changes in fair value of biological assets.

Q & A

What is the focus of the lecture on agriculture in relation to International Accounting Standards 41?

The lecture focuses on defining agricultural or biological assets, discussing their initial and subsequent measurement, and understanding how to account for and present these assets in financial statements according to International Accounting Standards 41.

What is the definition of a biological asset according to the lecture?

A biological asset refers to living animals and plants that are under management and are expected to generate future economic benefits through biological transformation and harvest.

What are the general requirements for measuring biological assets in terms of fair value?

Biological assets are generally required to be measured at fair value if an active market price is available. If fair value cannot be reliably measured, the cost can be used instead.

What is the concept of agricultural activity as discussed in the lecture?

Agricultural activity refers to the management and transformation of biological assets, such as the growth and maturation of plants and animals, which are expected to produce agricultural produce.

How are harvested products defined in the context of agricultural accounting?

Harvested products are the result of the biological transformation and harvest of biological assets, such as the milk from a dairy cow, fruits from trees, or timber from a forest.

What is the difference between consumable and non-consumable biological assets?

Consumable biological assets are those that are harvested as agricultural produce and are intended for sale, like fruits or livestock. Non-consumable biological assets are not intended for harvest as produce but may be used for other purposes, such as ornamental plants.

How does the lecture distinguish between managed and unmanaged biological assets?

Managed biological assets are those under the control of the entity and are part of agricultural activities, such as farmed fish or cultivated crops. Unmanaged assets, like wild fish in the sea, are not considered biological assets for accounting purposes.

What are some examples of agricultural activities mentioned in the lecture?

Examples of agricultural activities include dairy farming, livestock and poultry farming, prawn farming, horse and cattle breeding, forestry activities for timber, cultivating vineyards, and floriculture.

How does the lecture explain the concept of 'biological transformation' in relation to agricultural assets?

Biological transformation refers to the growth, degeneration, production, and procreation of biological assets, which leads to either quantitative or qualitative changes in the assets, such as a tree growing to maturity or a cow producing milk.

What is the significance of distinguishing between consumable and non-consumable biological assets in accounting?

The distinction is important for proper accounting and financial reporting, as consumable assets are expected to generate future economic benefits through sale or conversion into agricultural produce, while non-consumable assets may serve other purposes and have different accounting treatments.

How does the lecture address the presentation of agricultural assets in financial statements?

The lecture suggests that the presentation of agricultural assets in financial statements involves determining whether they are current or non-current assets and ensuring that any gains or losses related to changes in fair value are properly accounted for.

Outlines

00:00

🌱 Introduction to Agricultural Accounting Standards

This paragraph introduces the lecture on agricultural accounting, focusing on International Accounting Standards 41. It outlines the learning objectives, which include defining agricultural or biological assets, discussing their initial and subsequent measurement, and understanding their presentation in financial statements. The paragraph emphasizes the importance of fair value measurement when an active market exists, and the concept of biological assets as living animals and plants under management, which are subject to transformation processes such as growth and production.

05:03

🐄 Biological Assets and Agricultural Produce

The second paragraph delves into the specifics of biological assets, which are living animals and plants managed for agricultural purposes. It discusses the transformation and harvest of these assets, leading to the creation of agricultural produce. The paragraph also explains the future economic benefits derived from these assets, such as sale, production of consumable products, and the creation of additional biological assets. It distinguishes between managed biological assets and unmanaged activities, like circus animals or garden displays, which do not qualify as biological assets under the accounting standards.

10:04

🐠 Agricultural Activities and Consumable Biological Assets

This paragraph provides examples of agricultural activities and defines consumable biological assets within the context of IAS 41. It includes various forms of farming such as dairy, poultry, livestock, and prawn farming, emphasizing the management and control over these biological assets. The paragraph also discusses the concept of agricultural produce, which is the harvested output from biological assets, and distinguishes between consumable biological assets like mangoes and non-consumable ones like timber from forestry activities.

Keywords

💡Agricultural Assets

Agricultural assets refer to living animals and plants that are part of agricultural activities. These are managed and transformed through agricultural practices to produce economic benefits. Examples from the script include dairy cows producing milk and mango trees bearing fruit.

💡Biological Transformation

Biological transformation involves the processes of growth, degeneration, production, and procreation of biological assets. This concept is crucial in agriculture as it describes how plants and animals develop over time to become agricultural produce. For instance, a plant growing and eventually producing flowers or fruits is undergoing biological transformation.

💡Fair Value Measurement

Fair value measurement is the practice of valuing agricultural assets based on their current market price. According to the standards mentioned in the script, fair value should be used unless it cannot be measured reliably. This ensures that the value of assets like livestock or crops reflects their true market worth.

💡Agricultural Produce

Agricultural produce refers to the harvested products obtained from biological assets. These include items like milk from dairy cows or fruits from trees. The script highlights that agricultural produce results from the biological transformation and harvesting of living plants and animals.

💡Initial Measurement

Initial measurement is the process of valuing agricultural or biological assets at the beginning of their lifecycle. This is crucial for accounting purposes, ensuring that the assets are recorded at their fair value or cost if fair value is not reliably measurable. The script mentions this in the context of setting up the initial financial records for assets like animals and plants.

💡Subsequent Measurement

Subsequent measurement involves revaluing agricultural assets after their initial measurement. This could include adjustments based on changes in fair value over time. The script discusses this in relation to the ongoing valuation of assets like crops or livestock as they grow and develop.

💡Future Economic Benefits

Future economic benefits are the potential financial gains that can be obtained from agricultural assets. These benefits can come from selling the produce, converting biological assets into other products, or further breeding animals and plants. The script emphasizes that both agricultural produce and biological assets can generate these benefits.

💡Managed Activities

Managed activities refer to agricultural operations that are controlled and overseen by an entity, such as a farm or a company. This includes activities like fish farming or poultry raising. The script differentiates managed activities from unmanaged ones, such as wild fish in the ocean, which are not considered agricultural assets.

💡Consumable Biological Assets

Consumable biological assets are those intended to be harvested or sold as part of agricultural produce. Examples include crops like maize or livestock like cattle that are raised for meat. The script provides examples like mangoes and dairy cows, which are used for their consumable products.

💡Bearer Plants

Bearer plants are plants that are used in agricultural activities to bear produce over several periods. Unlike consumable plants, bearer plants are not harvested for their own value but for the produce they generate, such as fruit trees. The script mentions durian trees as an example, which produce durian fruit over many years.

Highlights

Introduction to International Accounting Standards (IAS) 41 issued by the International Accounting Standards Board.

Definition and measurement of agricultural or biological assets.

Biological assets refer to living animals and plants, distinguishing them from non-living tangible items.

Initial and subsequent measurement of agricultural or biological assets.

Agricultural activity involves the transformation of biological assets from birth or planting to maturity.

Examples of agricultural produce include flowers from plants and milk from dairy cows.

Biological assets are generally measured at fair value unless fair value cannot be measured reliably.

Agricultural activities are managed by the company and include activities like fish farming, planting, and growing animals.

The management of biological transformation and harvest of biological assets for sale or conversion into agricultural produce.

Future economic benefits generated from agricultural assets and produce.

Harvesting of produce from biological assets, such as picking strawberries from bushes.

Biological assets include consumable assets that can be harvested or sold, such as mangoes and calves.

Examples of agricultural activities include dairy farming, livestock raising, poultry farming, and fish farming.

Forestry activities result in agricultural produce like lumber and timber.

Vineyard cultivation and the distinction between biological assets (trees) and agricultural produce (grapes).

Transcripts

this is a lecture format for us 141

agriculture would you stop it for for

our subject for 320 and in the first one

for one agriculture is if you will into

the International Accounting Standards

41 that was issued by International

Accounting Standards Bart

so let's touch so this is the topic

outcomes should be able to define

agricultural or biological assets at the

end of the at the end of the topic they

should be able to discuss the initial

measurement yeah usual measurement of

agriculture or biological asset will be

looking at where biological asset for

star let me inform you with about Eagle

asset refers to living animal and living

plants so it's not about tangible items

please do not have life but this is

about living things which is living

animal and living plants we also be

looking at a subsequent measurement of

agricultural biodiversity prepare the

relevant accounting entries to record

the magical assets and whatever gain or

loss pertaining to the change in fair

value later looking at presentation the

suppo and also how we present the asset

logical asset in the soft P is it a

non-current asset or is it a current

asset let's start looking at the detail

so this in a forest and a forest one for

one sets accounting for agricultural

activity for start you should know that

agricultural activity talks about

transformation of biological assets

right meaning something to do with how

the plans are being transformed how

animals transform from day one of being

born until it becomes a mature animal

and from the day the plant is being

cultivated being planted until it bear

the first fruit for example the first

flower for example oh we are looking at

the transformation of this into

agricultural produce so the flower for

example is the produce coming from the

flanks the milk for example is actually

the agricultural produce of the dairy

cow so those are called harvested

product to be looking into that and as

you are aware we need measurement to

measure asset and for biological asset

standards generally requires to be

measured at fair value so whenever there

is an active market price

there are FRS one-for-one says you must

use fair value unless the fair value is

not available fair value could be not be

able to have an active market no

whatsoever the issue you can measure

using cost but generally standard in

favor of fair value unless fair you

cannot be measured reliably next what

before we start on the first one for one

is on agricultural activity so

agriculture TBT we need to first

understand what is agricultural activity

before we start looking at those animals

and plants that are mannish as part of

agricultural activities so according to

IMF RS 1 for 1 this is the management

meeting that we are talking about the

activities that are being managed by the

company so we are not talking about

unmanaged activities we're not talking

about the fish in the sea or ocean fish

farming we are talking about the fish or

whatever activities the planting or the

of 3

or the growing of animals which are

under the management of the entity where

management here management of biological

transformation yeah how is the changes

of this biological asset and the harvest

of this harvest of the biological asset

4-cyl right but you call transformation

for still let's say you want to sell the

budget but the animal that you have

already managed in your farm right so

for sale or maybe the magical asset yeah

as a result of that you have harvested

the magical asset and big that gives you

the agricultural produce and that

agricultural produce is as a result of

magical transformation and harvest off

multiple asset so and the last one is

according to Emma Flores one for one how

the magical transformation and harvest

or magical asset was actually done for

the conversion into additional

biological asset so these three things

here is actually the future economic

benefits that will be generated for the

magical asset and agricultural produce

right so therefore the sea robotica

asset will bring future economic

benefits the agricultural produce coming

from the detachment from the biological

asset will also brings future economic

benefits if you bought that agricultural

produce

let's say the flower here are being sold

right conversion into additional value

can asset let's say the chicken you go

and have more chicks here and those are

additional biological asset right so

those are also the most possible or

probable future economic benefits of the

entity but it comes from this to process

of magical transformation and the

harvest of the magical asset that has

undergone the magical transformation

so whatever unmanaged activities or

things done for rectory recreational

purpose these are not magical asset

let's say you manage an animal for a

circus or maybe just have a trees for

the purpose of putting them in your

garden just to have that as a display

those are not biological assets so these

are there an important definition as I

said it's about the management

activities being managed it's about the

biological transformation of the body

per asset and the harvest of that

magical asset the detachment of the

biological asset yeah and that was done

for three purpose for sale for

conversion into agricultural produce and

for conversion into additional budget

and I mentioned to you just now this is

the so-called future economic benefits

and I mentioned the word physical

transformation when we talk about

agricultural activity so what our custom

bicycle transformation you'll go into

detail later but that in simple word is

about growth degeneration production and

procreation or magical asset that will

cost either quantitative or qualitative

changes in the bicycle asset so most

importantly is that vertical asset

refers to animal and plant the living

animal living plant which is under our

management but plan here we'll have some

exception now we see later this one will

be an exception of a pair of plants

agricultural produce determined we

mentioned here

it's the harvested Prada of the

biological asset as I mentioned earlier

let's say mangu is the harvested Prada

of the mango tree durian is the

harvested product of a do entry or the

latex is the harvest intruder of a rumba

tree right and maybe lumber is the

product comes from the forest raishin

those are all agricultural produce you

can see this is my example later harvest

is the detachment of produce from

biological asset so if you go and take

the strawberry from the strawberry bush

bushel alright so there for you that one

is actually the detachment of produce

right and also when you see about little

asset like process let's say the

slaughtering of animal yeah anymore

being slaughtered that will seize the

life of magical asset yes a d-ring there

so called ideal at her mind a lot of her

celebration that's raw of slaughtering

taking place cost to sell all this will

cover into detail later and you should

also know what are consumable by asset

which is within the context of a mefaris

one-for-one that refers to those that

are to be harvested as agricultural

produce so let's say mango yes now was

the consumable you can asset or soul as

biological asset let's say you have the

cow that gave birth to a calf and that

calf later can be sold as biological

assets those are consumable by multiple

asset right so you can go through this

yourself fish in the farm crops such as

means we'd only be debris an immolation

context or maybe mango right production

of

these are all consumable magical assets

right and also produce on a better plant

right so let's look at the next part

these are some example of agricultural

activities where you can see here it's

about dairy cow maybe this one is dairy

cow in New Zealand or maybe the Erica in

Kunduz San Saba yeah because dairy cow

are normally being there for us to get

milk for the milking there you go

raising livestock poultry chicken duck

farming all the cow and sheep farming

you can see the pictures their vision

grandpa farming I'm talking about the

fish which are in our coupon the prawn

which is within our control the one

inside this cage for example not the one

which is somewhere here which is not

within our control the one under our

management right same thing goes here

the one under our management they say

this one is under our management our

company but this one belongs to others

so this is not our biological I said our

prawn farming that is under our control

so from like horse and cattle breeding

yeah you breathe them not for milk but

it was for example the horse is later

being sold off because they won the

horse needed to use as a transportation

during those Cowboys movie those days or

maybe to use in the race costs to get

them more future economy benefits so

that is the one this one is dairy cow

maybe we breed them for the purpose of

getting the

agricultural produce the milk you can

see this forestry activities which give

rot the result here is the lumber the

timber and those other agricultural

produce cultivating wineyards just like

all palm this is grape fruit where the

grape is the agricultural produce right

the trees is going to be the biological

asset they do when it takes around 5

years for degree and three to four five

around four to five years Cody ran to

first bear the fruits and the rent fruit

is actually the agricultural produce but

durian trees here yeah it will keep on

producing you and for the next maybe

five to ten years ten years right so the

venturi is not a biological asset is a

better plan you'll see this this one is

the paddy field right this one

also under the paddy plantation the

Harmony's trees are a better plan but

the Harmony's fruit itself is an

agricultural produce we're going to talk

about better plans and there are some my

floriculture activity where for recalls