LECTURE 4/4 : MFRS 141/ IAS 41 AGRICULTURE (BIOLOGICAL ASSETS) : FAR320 TOPIC 2-PART 4
Summary
TLDRThe lecture delves into the accounting treatment of biological assets under IFRS 1-1, focusing on recognition, measurement, and examples of a Danish dairy farmer and a sheep farmer. It covers the initial recognition of assets, fair value changes, and the preparation of journal entries for transactions like asset births, sales, and gains or losses on fair value changes. The importance of distinguishing between current and non-current biological assets is highlighted, along with the disclosure requirements for agricultural activities and government grants.
Takeaways
- 📘 The lecture is focused on part four of a series covering IFRS 13 (International Financial Reporting Standard 13) on fair value measurement.
- 🐄 The example involves a Danish dairy farmer who cultivates cattle for meat and sells them, also recognizing the biological assets for future economic benefits.
- 📊 The fair value of the cattle as of December 31st of year 0X0 is given as 10,000, which is used for initial recognition in the biological asset account.
- 📈 The script discusses the accounting for changes in fair value, including the recognition of gains on initial recognition and fair value changes during the year.
- 📝 Journal entries are provided to record transactions such as the birth of calves, sales of cattle, and the recognition of gains or losses on changes in fair value.
- 💼 The concept of 'fair value less cost to sell' is central to the recognition and measurement of biological assets.
- 📉 The script includes an example of a gain on the sale of biological assets, calculated by considering the fair value at the time of sale minus selling costs.
- 📚 The importance of understanding the accounting treatment for biological assets under IFRS 13 is emphasized, including the recognition of gains and losses.
- 🌱 An example of a sheep farming activity is given, where the sheep are biological assets used for wool production, not meat.
- 📋 The script outlines the requirements for disclosures related to biological assets, including physical quantities, output, and any restrictions on title.
- 🏞️ The lecture touches on the accounting for agricultural produce, such as wool from sheep, and the distinction between biological assets and agricultural produce.
Q & A
What is the main topic of the lecture and examples discussed in the transcript?
-The main topic of the lecture is the recognition and measurement of biological assets according to IFRS 13 (International Financial Reporting Standard 13), with a focus on examples related to livestock farming and sheep farming.
What is the significance of slide 39 in the lecture?
-Slide 39 marks the transition to the discussion of examples, specifically starting with example two which deals with a Danish dairy farmer cultivating cattle for meat and the accounting treatment of such biological assets.
What is the purpose of cultivating cattle for the company mentioned in the transcript?
-The company cultivates cattle for two main purposes: to sell the meat and to sell the cattle to the slaughterhouse, which generates future economic benefits.
What is the fair value of the cattle as of December 31st, 0X0 according to the transcript?
-The fair value of the cattle as of December 31st, 0X0, is ten thousand.
What is the concept of 'fair value less cost to sell' mentioned in the transcript?
-'Fair value less cost to sell' is a measurement required by IFRS 13, which refers to the amount that would be received to sell an asset in an orderly transaction between market participants at the measurement date, minus the costs that would be incurred to sell the asset.
What transactions need to be recorded in the journal entries according to the transcript?
-The journal entries need to record the birth of calves, the sale of cattle, the recognition of gain on initial recognition, and the gain or loss on the change in fair value of the livestock.
What is the gain on initial recognition for the biological asset at the end of the year according to the transcript?
-The gain on initial recognition for the biological asset at the end of the year is 1200.
How is the profit from farming activities reflected in the transcript?
-The profit from farming activities is reflected in the transcript as revenue from the sale of biological assets and other income from the fair value gain, which is the result of the fair value changes during the period.
What is the difference between the fair value at the beginning of the year and the fair value at the reporting date for the sheep farming example?
-The difference between the fair value at the beginning of the year and the fair value at the reporting date for the sheep farming example is 4,100, indicating a gain on fair value change.
What is the accounting treatment for the gain on fair value change in the sheep farming example?
-The accounting treatment for the gain on fair value change in the sheep farming example is to debit the biological asset account with the gain amount and credit the fair value gain or other income account, reflecting the increase in the asset's value.
Why does the coconut tree example not meet the definition of a biological asset under IFRS 13?
-The coconut tree example does not meet the definition of a biological asset under IFRS 13 because it is accounted for under IAS 16 (Property, Plant and Equipment), as it is considered a long-lived asset that does not meet the specific criteria for biological assets.
Outlines
📊 Biological Asset Accounting: Recognition and Measurement
This paragraph discusses the recognition and measurement of biological assets, specifically cattle cultivated by a Danish dairy farmer for meat. It explains the accounting treatment for these assets under IFRS 1 for 1, including the initial recognition at fair value less cost to sell, and subsequent adjustments for changes in fair value. The example illustrates the journal entries for the birth of calves, the sale of cattle, and the year-end adjustments. It emphasizes the importance of understanding the concept of fair value less cost to sell in the context of biological assets.
📈 Journal Entries for Biological Asset Transactions
The second paragraph delves into the specifics of journal entries related to biological assets, focusing on the gain on initial recognition and the sale of the asset. It outlines the process of recording transactions such as the birth of new calves and the sale of mature cattle, including the calculation of fair value less cost to sell. The summary also touches on the recognition of revenue from the sale and the cost of sales, as well as the accounting for gains or losses on changes in the fair value of the biological assets.
🐄 Fair Value Changes and Profit Calculation in Biological Asset Accounting
This paragraph examines the calculation of gains or losses on the fair value changes of biological assets, using the example of a livestock herd. It details the process of comparing the fair value at the beginning and end of the year to determine the gain or loss, and the subsequent journal entries required to reflect these changes in the financial statements. The summary highlights the importance of including both initial recognition gains and period gains in the income statement, and the impact on the net profit from farming activities.
🐑 Acquisition and Accounting of a Sheep as a Biological Asset
The fourth paragraph introduces a new example involving the acquisition of a sheep by Marsha, which is accounted for as a biological asset. It explains the initial measurement of the asset at cost and the subsequent comparison with the fair value at the reporting date to determine any gain or loss. The summary includes the journal entries for recognizing the gain on fair value change and the presentation of the biological asset in the balance sheet, emphasizing the sheep's role in agricultural activity for wool production.
🌱 Accounting for Wool Production and Biological Asset Disclosure
This paragraph discusses the accounting treatment for wool production, distinguishing it from the accounting for the biological asset of the sheep itself. It explains that wool is considered agricultural produce and not a biological asset, and therefore is accounted for differently. The summary also touches on the disclosure requirements for biological assets, including the nature of the assets, physical quantities, and any restrictions or government grants related to the assets.
📝 Comprehensive Overview of Biological Asset Accounting and Disclosure
The final paragraph provides a comprehensive overview of the accounting and disclosure requirements for biological assets, including the classification of assets as current or non-current based on their expected harvest time. It also discusses the treatment of government grants, distinguishing between unconditional grants that are recognized as income and conditional grants that are recognized as liabilities until conditions are met. The summary encourages further study and practice to fully understand the complexities of biological asset accounting.
Mindmap
Keywords
💡Biological Asset
💡Fair Value
💡Cost to Sell
💡Recognition
💡Measurement
💡Agricultural Activity
💡Journal Entry
💡Gain on Initial Recognition
💡Gain on Fair Value Change
💡Agricultural Produce
💡Government Grants
Highlights
Continuation of a lecture series on Anna Faris, focusing on part four with examples.
Discussion on slide 39, which is about recognition and measurement of biological assets in the context of a Danish dairy farmer.
Explanation of how the dairy farmer cultivates cattle for meat and sells them to generate future economic benefits.
Accounting for the fair value of livestock on December 31st, 0X0, which is measured at cost to sell.
Journal entries for transactions involving the birth of calves and the sale of cattle.
Understanding the concept of 'fair value less cost to sell' in the context of biological assets.
Recording the gain on initial recognition and the sale of biological assets at fair value.
Calculating and recording the cost of sales and the revenue from the sale of biological assets.
The importance of recognizing gains or losses on the change in fair value of livestock.
Accounting treatment for the recognition of gains on initial recognition and fair value changes.
Practical application of IFRS 1-1 in preparing journal entries for biological assets.
The impact of government grants on the accounting of biological assets and the distinction between unconditional and conditional grants.
Differentiating between biological assets and agricultural produce, such as wool from sheep farming.
The accounting for the acquisition of a sheep as a biological asset and its subsequent fair value changes.
The presentation of biological assets in financial statements, including current and non-current assets.
Disclosure requirements for biological assets, including physical quantities, output, and government grants.
The distinction between accounting for biological assets under IFRS 1-1 and other accounting standards like MF RS.116.
The example of coconut plantations and the rationale for accounting for them under MF RS.116 instead of IFRS 1-1.
Encouragement for students to practice more questions to enhance their understanding of accounting for biological assets.
Transcripts
man very good day to everyone out there
are we gonna continue with our part four
of our lecture and examples on Anna
Faris one-for-one yeah but for we are
now at slide 39 and this spot is going
to discuss mostly examples and we will
start off with example two which is on
recognition and measurement of
biological si so ever company the Danish
dairy farmer heart cultivates cattle as
livestock for meat so it was cultivated
for meat yeah and sell the cattle to
float the house apart from selling those
meat they also sell the cattle to the
slaughterhouse so it will be those
generate those that generate future
economic benefits that's at 31st of
December to 0 X 0 the fair value which
is the measurement required by my first
one for one less cost to sell of the
entity livestock the whole livestock
yeah which is the cattle is ten thousand
right so if you look at before we start
reading more if you look at the
requirement given here you are asked to
do things for the refers of the assemble
to 0 x1 so the one that you are given
here is the figure from last year of
previous periods so this 10,000 is the
fair value less cost to sell of the
empty life now so this one will be shown
in the biological asset so if you talk
about this year which starts on 1st of
January to 0 x1 you should have already
some balance in the account of
10,000 so this is the Barry cabassa
asset brought down Berlin as at first on
January 2 0 x1 okay and that s at fair
value less cost to so and then in 2000
x1 the year that we are concerned now
they will it cuff that were born so it
tough were born on the day was born they
were born the entity also notice that in
that year they sold some - so on the day
that come was born there were no price
yet but you would see that at the end of
the year there will be price for that
changes for the it cuffed everyone so we
have sold some 10 hi first so these are
what you sold off so the - 10 of them so
there will be some reduction in the
value core asset and the figure here the
one given here this is actually the fair
value of the - at that date and you also
incur a selling costs off 10 ring it so
that 10 bring it pull - is actually your
cause to sell so you should understand
the concept of fair value less cost to
sell and again you are informed that the
fair value less cost to sell s at the
difference of December 2000 x1 is 14,000
so this one you are already given what
other biological assay measurement as at
31st of December 2000 x1 so meaning that
at the end of the year you are also
given the fair value less cost - so you
are asked to do the journal entries to
record the above transaction right
so meaning to say that you need to
record the transaction that were given
so there are few transaction here but
the first one is the calf that were born
so let us look at we erase this first so
that we can record things here yeah so
that's a record for this one first for
the 8 cuffs and you also will erase the
one related to weight yeah just bear
with me so let's look at our journal
entry now okay for the account that were
born this one year what you would do is
you will have to see what happened at
the end of the year so at the end of the
year you are informed that the 14,000 it
also includes the gain on initial
recognition so we need to say that this
is the one at the beginning of the year
but at the end of the year it is 1200 so
this is actually gained on initial
recognition so we need to record the
first translation for this one which is
for gain on initial recognition the
second transaction will be for the sale
of the - so we need to record it at the
fair value less cost to sell so for the
first transaction here there be
biological asset credit the gain on fair
value change and how much there is gain
on
show recognition and that has been given
to you you don't have to calculate it
was 1200 that was the first thing that
you need to record and then the sale of
the belgica asset which is going to be
number number two this is the one here
number two the real recordin and you
will debit it's for number two
debit bang
we will also debit our selling costs and
because that is our revenue who
work-ready revenue so what you need to
do is you need to first take the figure
given which is 10 - times 200 which is
the fair value and the less cost to sell
so if you can do it here to make you see
better okay so let's do it here okay so
we will do it here 200 minus 10 times 10
so that one is the proceed that you get
in your bank so that one will be 1904
the selling cost it would be this is for
the one in the bank but the second one
would be 10 which is the setting price
times 10 - so that will give you 100 so
the revenue that you would record would
be 2,000 and this will go to the to the
so pole at the same time when you have
recorded the revenue you are HD
recording revenue from the sale of body
KS
so therefore you need to record now the
to recognize the cost of sales we will
debit cost of seal and since you go and
dispose or sell the Biotest you need to
go and creditor be e or bazooka asset
how much it was 1909 which is at the
fair value less cost to sell so that was
number three actually and then the last
general entry would be to record the
fair where you gain or loss so we will
have to see that in our next slide let's
see the requirement even here is to
record the journal entry and we have
done three of them let's look at the
fourth one here so this is the first
entry that I have done with you which is
the recognition of gain on initial
recognition and the second one is the
journal entry related to the recognition
of sale of the value Co si the third one
relates to the recognition of cost of
sale and now we are looking at what
other gain or loss on the February
change of the livestock which is the
hurt and if you look at the figure given
you are given 14,000 to be the one at
the end of the year meaning there is a
31st of December x1 the one a beginning
of the year was 10,000 and there was as
at beginning of the year this is from
the barnacle asset account and you are
informed that there was again yeah
but the gain reduces the budget is that
so this is
1900 this is the gain on initial
recognition and our focus is to find
what other gains on fair value changes
which is on the reporting date so if we
do that you would need to also add minus
1200 sorry this one is the cost of sale
so minus 1200 which is from the entry
here this one right so the first entry
versus the third entry okay if you do
that you will get 4700 that is the gain
on fresh where you change and this is
the one that will be shown in the income
section so that was Ford again if you
get a loss you will have to do the
reverse journal entry so those are the
gain unfair a routine for the change in
terms of the logical asset and that's
another one gain on initial recognition
so let's look at the about UK asset
account even here as I say this one is
given in the question beginning balance
these are our record when we recognize
the cost of sale this is our record when
we recognize our gain on initial
recognition and the different or the
balancing figure here is as a result of
what you have as recognized as fair
value change you know gain on fair value
change please note that the entity
measure the particle asset including the
eight curve
during the period at fair value so in
this fourteen thousand here it has also
included the gain on favor you change as
well as the gain on initial recognition
so there has been included by the total
is five thousand nine hundred the gain
unfair edit throughout that year and
let's look at the ephah in the statement
of profit or loss so revenue you are
trying to find that profit from the
farming activities revenue are being
recorded there and then other income is
the fair value gain which is as a result
of four thousand seven plus one thousand
two and this is from the cost of seal
and this is from the selling expenses so
your net profit from farming is five
thousand nine hundred and that will be
added to the may be the profit from
other sources next logical asset that
will be shown here must be at fair value
less cost himself that is given in this
question you are given some question you
may have to to work out so we'll see
this kind of question if is not even
okay next is to look at this example
which will be our last example
it's about Marsha that bought a sheep so
when Marcia bought a sheep that is not
true biological transformation but
because of the purchase or new
acquisition and it was at a cost of
sixty thousand so when this happened
this is on 1st of January
so this one is acquisition of Boddicker
asset and our current period here is
31st of December to 0 x8 so for this
transaction
big biological asset 60,000 and this is
a course because maybe farewell you
cannot be measured reliably and you will
credit bang or you will credit payable
with also 60,000 and they have give rise
to have given rise to the magical a set
and the sheet that was acquired by
Marsha is engaged in a sheep farming so
she farming is an actually an
agricultural activity and the farming is
not to get the milk
but for wool so wool will be the
agriculture for produce so the ship is
the animal right living animal and this
is the budget or assay but the wool that
is shipped from the ship this is
agricultural produce right so that was
the purpose of ship farming on the
reference of December similar ship with
the same physical characteristic it has
a fair value of 67 five hundred so this
is the fair value and the cost to sell
given here is three thousand four
hundred costs to sell so what you need
to understand is you need to understand
that there are two fair value even one
is on first of January
there is no fair value so therefore our
we are going to compare this with the
carrying amount given so changes in
we're going to look at changes in fair
value but there are no fair value so the
cost now will be the carrying Amana we
will compare the care carrying a mom
with the fair value that is available
later and this is sixty sixty thousand
on 31st of December to 0x a the fair
value less
to sell so farewell he was 67 500 cause
to sell was 3400 so you'll get 64 100
right so the difference is 4,100 and you
can see that their fair value at the
reporting date is greater than the fair
value at the beginning of the year and
therefore there is a gain on fair value
change because the favor
at the end of the reporting date is
created and the fair value at the
beginning of the year or the the remote
recent reporting did for for this fair
value so this is the first you know so
the second general would be to record
the gain on fair le chien so there be
biological asset with 4,100 and credit
your farewell you gain favor you gain or
favor league in here is unfair reading
change right so this will be in your
supple and this is under income how much
4100 4100 so let's look at the prop the
requirement you asked to explain the
accounting treatment so you have to
explain that accordance with a mefaris
one-for-one and also to prepare that you
know i've already prepared the journal
for you but you have to you want to see
the proper presentation let's see that
together now right the first part is to
explain so when you are to explain you
need to mention that that is to be
recognized as value Caressa and give the
reason why so that is because it is a
living animal remember logical asset can
only be living animal or living
plans that are managed by the company
under an agricultural activity so but
here the agricultural activity near
agricultural activity in our case here
activity that is managed by the entity
is sheep farming sheep farming but more
specifically that is not for me not for
meat but for wool now maybe the wool
will later be turned into a jacket or
may be turned into a carpet whatsoever
and that was initially measured at costs
right so it was measured at cost and
then at the end of the reporting period
at the end of the reporting period you
have again in fair value get on fair
value change so let's look at what is
given so the figure here shouldn't be
120 it should be 60,000 apologize for
the mistake yeah because I have wrongly
copied so it should be 60,000 at the end
of the reporting period on 31st of
December there was again in change of a
value so you need to explain what you
have generalized this now so you need to
give the amount how much and show the
calculation I've earlier show and I
shown you the calculation and what is
the treatment recognized as an income
you need to mention that you compare
city the caring will allow given with
the fair value even and that is going to
be 4,100 and the value that you will
show in your vehicle si s carried down
balance would be sixty four thousand one
hundred so but you could asset now will
be this 60 Plus this 4100 and that one
will be shown in your
extra-soft p under non-current sa and
that is going to be how much 64 100 and
that will be your biological asset
whereas this 4100 will be shown in your
supple part of other income and there is
actually income of the for farming
activities these are the presentation
for Belgica asset and those related to
value co asset so you may have better
plans as I see it their plans is not
within the context of value que ésta in
terms of is accounting better plans are
value que si only that that is not
accounted under IFRS one for one
because better plans are accounted for
under MF rs.116 it is still about USA
only that it is not accounted for under
IFRS one for one and by jakka I said
that are going to be harvested more than
two of mine from the reporting date by
durian tree is like rubber trees those
will be a classifier as magical sa
non-current asset however if you have
magical asset that can bear produce like
perennial cropping which is for maybe
every three months or maybe every six
month or every every month right that is
to be harvested within two of mine right
so that has to be shown as current asset
let's say you have a livestock lights
you can and I have to be slaughtered
within 12 months or maybe annual crops
like wheat that will have to be
harvested within less than a year those
should be put under buy or decay asset
and then you may also need to look at
the inventory section because there will
also be inventories
produce from the agricultural produce
let's say the tea leaves the tea leaves
will be turned into finished product tea
just like boh tea plantation the tea
leaf were later manufactured in the
factory and becomes 40 and those tea
that expect being packed or being
manufactured those are actually under MF
rs10 to buy the tea leaves that will
actually attach to the tree without
being plucked from the tree bush
straight sorry the tea bush that has to
be accounted still as part of purge go
sa disclosure so these are the
disclosure requirement you need to show
what other gain or loss from both
initial recognition right and also gain
or loss from the change in fair value
during the period that you are concerned
concerned sorry you need to also
describe the entities particle asset do
you have a plan or you have a and what
types of animal do you actually manage
in your agricultural farm yeah and the
group of iogicai asset any estimation of
physical quantities or output during the
period right information about about UK
asset if you have title that is
restricted or is pledged as a security
now you can read this on your own
right financial risk management what are
the commitment for the acquisition about
us I do you have any maybe government
grounding attached to the body Caressa
if you are a felled ah or fell cross
settler so are you given that as part of
the government grant the permission to
go in have that agriculture activity is
being done next other related issues so
the government runs sometimes about your
assets are given or granted by the
government some of them with conditioner
right some are without
any condition so unconditional versus
conditional government granny
so government grant if it's
unconditional meaning that they don't
you don't have any particular condition
to be mattes and you they just give you
and he becomes receivable becomes your
income so therefore you have to debit
but you can assert and credit government
grant in the supple yeah so if that is
under your company given to your company
however if the govern grant are received
and you it is there are condition that
you need to meet before it becomes your
income so therefore the about government
grants shouldn't be treated as an income
but it will be treated as an an income
but somehow it will increase the value
KSA of your company because granted
monitor government only that one is an
income the other is not yet as an income
until the condition is big match so it
is treated as per liability but here is
an income next and so this one is for
you to read yourself and go through
regarding accounting for better plans I
have already prepared for you this
coconut plantation in bagging dato para
and has something to do with land and
the coconut tree please feel free to go
through and read and understand this
example yourself and see why coconut
tree does not meet the definition of or
cannot be accounted for under IFRS one
for one is accounted for under MF rs.116
go and check check it out that all the
conditions and the better plans are
being met right and see that coconut
tree are also being depreciated right
because coconut tree are PPE
right and then the land that is used to
grow the coconut tree is not about yuca
asset but that is
a PPE so we're inside the presentation
here and that's it we are done with our
topic go and do more questions more
questions to get those level of being
able to do question you need to go and
practice more go and reach reach and
greet so reach will help you to
understand more okay so thank you for
watching I'll see you and I will see you
now go and learn and ceremony Kumaran
total barakah
Weitere ähnliche Videos ansehen
LECTURE 1/4 : MFRS 141/ IAS 41 AGRICULTURE (BIOLOGICAL ASSETS) : FAR320 TOPIC 2 - PART 1
IAS 41 Agriculture summary - applies in 2024
Accounting for Sub-Leases
PSAK 71 adopsi IFRS 9
Aset? Ada yang Lancar, Ada yang Enggak Lho!! | #akuntansi #akuntansidasar
ACCA I Strategic Business Reporting (SBR) I IAS 20 - Govt Grants & Govt Assistance - SBR Lecture 11
5.0 / 5 (0 votes)