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IAS 41 Accounting for Biological Assets
Dear members,
I have a serious problem with application of IAS 41.
I have my maize farm which has maize plants which are one month old. It takes about six months to harvest. There is no market for such immature maize plants. According to IAS 41, biological asset need to be valued at fair value less point-of sale costs. If fair value cannot be established, then one can value it at cost less accummulated depreciation and armotization. But there is no way my plant will depreciate, it will only appreciate in value and there is no mention in IAS 41 of treatement of value appreciation! How do I manouver out of this quagmire?
The other issue is IAS 41 Para 35 requires that if the grant is conditional, it shall be recognized as income when, and only when, the attached conditions are met.
When are we going to recognize government grant as income if there is a condition attached to it that an entity not to engage in specified agricultural activity?
I have a serious problem with application of IAS 41.
I have my maize farm which has maize plants which are one month old. It takes about six months to harvest. There is no market for such immature maize plants. According to IAS 41, biological asset need to be valued at fair value less point-of sale costs. If fair value cannot be established, then one can value it at cost less accummulated depreciation and armotization. But there is no way my plant will depreciate, it will only appreciate in value and there is no mention in IAS 41 of treatement of value appreciation! How do I manouver out of this quagmire?
The other issue is IAS 41 Para 35 requires that if the grant is conditional, it shall be recognized as income when, and only when, the attached conditions are met.
When are we going to recognize government grant as income if there is a condition attached to it that an entity not to engage in specified agricultural activity?
Tags: IAS 41, biological assets
Views: 430
Replies to This Discussion
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Permalink Reply by George William Bester on -
Hi,
I had a similar experience, as there is no market available for the maize at the stage it has reached i used the total costs of bringing the plants to that age as a basis for valuation. These included;
-Labor (based on an apportionment arrived at after agreeing with sectional supervisors)
-Fertilizers and pesticides used
-Equipment operational costs and labor hours for operators.
Once the crops were ready the market value was used and the difference, between the earlier valuation and the one based on the ready crop, was taken to changes in valuation of Biological assets in the statement of financial position (more like a valuation gain).
I had only that option, i hope someone can provide a better basis.
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Permalink Reply by Shafi on -
Thanks George for your contribution. Please follow this scenario and advise as appropriate.
I have accumulated the cost of maize up to March when they are ready for harvest. The accumulated costs at this point are seeds USD 3000, fertilizer USD 1000, laborers USD 1000. At March the maize had a market value of USD 6000. Transportation to market costs USD 100 and agent costs at the market are USD 50. The harvested maize will need to be moisturized for three months before they can be sold. The fair value after three months is expected to be the same i.e. USD 6000. After moisturization, the maize will be packed at a cost of USD 200 before they can be sold in the market. I will appreciate if double entries for these transactions and ending balance sheet and income statement will be demonstrated.
Regards
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Permalink Reply by verona dorman on -
Hello,
Firstly, since the plants will not be depreciating then you use the cost as at the date you are preparing your accounts, do not include cost not yet incurred into your valuation.
Secondly, the issue regarding Conditional Government Grant - When you are using this type of funding you must ensure that each and every conditions are met before you can take it to your income statement as income. If at anytime you fail to meet these conditions you are liable to repay this grant.
Double Entries will be done and forward to you shortly
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Permalink Reply by Shafi on
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Thanks Verona. I appreciate your contributions and look forward to getting the double entries for the scenario given.
Kind regards
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Permalink Reply by R.Wayne on
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Hi
Did you get the entries for accounting for biological asset? I am not sure of the initial recognition. Can you help?
Regards
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Permalink Reply by Muhammad Abrar on
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If you peope still need help on this topic, please contact me. I will be more than happy to provide you the entries and any additional treatment under IAS 41.
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Permalink Reply by Shafi on
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Dear Muhammad,
I need help on the topic. Please send me the materials on my address kalutajr@hotmail.com
Will appreciate your assistance on the topic.
Kind regards,
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Permalink Reply by dina zulueta on
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pls help i need a chart of accounts for banana plantation business
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Permalink Reply by dina zulueta on
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Hello Verona,
Please help am doing a projected financial report for a backyard banana plantation kindly provide a
sample double entries,balance sheet and income statement
Regards
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Permalink Reply by Abaid ur Rehman on
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I also need reply for the same situation , please.
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