Biological Assets
4. Biological Assets
Breeding stock
At the beginning of the year
148,606 Gain arising from cost inputs
376,029 Decrease due to harvest
(382,759) Fair value adjustment
At the end of the year at fair value
Chapter 32 / Agriculture (IAS 41) 359
Broiler stock
At the beginning of the year
90,050 Gain arising from cost inputs
1,901,269 Decrease due to harvest (2,114,189) (1,900,056) Fair value adjustment
At the end of the year at fair value
98,885 Total at the end of the year at fair value
360 Wiley IFRS: Practical Implementation Guide and Workbook
MULTIPLE-CHOICE QUESTIONS
(c) Cost less accumulated depreciation and ac- 1. Which of the following is not dealt with by
cumulated impairment losses. IAS 41?
(d) Net realizable value. (a) The accounting for biological assets.
Answer: (c)
(b) The initial measurement of agricultural pro- 7. Which of the following costs are not included in duce harvested from the entity’s biological
assets.
point-of-sale costs?
(c) The processing of agricultural produce after (a) Commissions to brokers and dealers. harvesting.
(b) Levies by regulatory agencies. (d) The accounting treatment of government
(c) Transfer taxes and duties. grants received in respect of biological as-
(d) Transport and other costs necessary to get sets.
the assets to a market.
Answer: (c)
Answer: (d)
2. Where there is a long aging or maturation pro- 8. Which of the following values is unlikely to be cess after harvest, the accounting for such products
used in fair value measurement? should be dealt with by
(a) Quoted price in a market. (a) IAS 41. (b) The most recent market transaction price.
(b) IAS 2, Inventory. (c) The present value of the expected net cash (c) IAS 16, Property, Plant, and Equipment.
flows from the assets. (d) IAS 40, Investment Property.
(d) External independent valuation.
Answer: (b)
Answer: (d)
3. Generally speaking, biological assets relating to 9. A gain or loss arising on the initial recognition of agricultural activity should be measured using
a biological asset and from a change in the fair value (a) Historical cost.
less estimated point-of-sale costs of a biological asset (b) Historical cost less depreciation less impair-
should be included in
ment. (a) The net profit or loss for the period. (c) A fair value approach.
(b) The statement of recognized gains and (d) Net realizable value.
losses. (c) A separate revaluation reserve.
Answer: (c)
(d) A capital reserve within equity. 4. Entity A had a plantation forest that is likely to
Answer: (a)
be harvested and sold in 30 years. The income should be accounted for in the following way:
10. When agricultural produce is harvested, the har- (a) No income should be reported until first har-
vest should be accounted for by using IAS 2, Invento- vest and sale in 30 years.
ries, or another applicable International Accounting (b) Income should be measured annually and re-
Standard. For the purposes of that Standard, cost at ported using a fair value approach that rec-
the date of harvest is deemed to be ognizes and measures biological growth.
(a) Its fair value less estimated point-of-sale (c) The eventual sale proceeds should be esti-
costs at point of harvest. mated and matched to the profit and loss ac-
(b) The historical cost of the harvest. count over the 30-year period.
(c) The historical cost less accumulated impair- (d) The plantation forest should be valued every
ment losses.
5 years and the increase in value should be
(d) Market value.
shown in the statement of recognized gains
Answer: (a)
and losses. 11. Contract prices are not necessarily relevant in
Answer: (b)
determining fair value, and the fair value of a biologi- 5. Regarding the choice of measurement basis used
cal asset or agricultural produce is not adjusted be- for valuing biological assets, IAS 41
cause of the existence of a contract. (a) Sets out several ways of measuring fair
(a) True.
value.
(b) False.
(b) Recommends the use of historical cost.
Answer: (a)
(c) Recommends the use of current cost. (d) Recommends the use of present value.
12. Land that is related to agricultural activity is valued
Answer: (a)
(a) At fair value.
6. Where the fair value of the biological asset can- (b) In accordance with IAS 16, Property, Plant, not be determined reliably, the biological asset should
and Equipment, or IAS 40, Investment be measured at
Property.
(a) Cost. (c) At fair value in combination with the bio- (b) Cost less accumulated depreciation.
logical asset that is being grown on the land.
Chapter 32 / Agriculture (IAS 41) 361
(d) At the resale value separate from the bio- logical asset that has been grown on the land.
Answer: (b)
13. An unconditional government grant related to a biological asset that has been measured at fair value less point-of-sale costs should be recognized as
(a) Income when the grant becomes receivable. (b) A deferred credit when the grant becomes
receivable. (c) Income when the grant application has been submitted. (d) A deferred credit when the grant has been approved.
Answer: (a)
14. If a government grant is conditional on certain events, then the grant should be recognized as (a) Income when the conditions attaching to the grant are met. (b) Income when the grant has been approved. (c) A deferred credit when the conditions at-
tached to the government grant are met. (d) A deferred credit when the grant is approved.
Answer: (a)
15. Where there is a production cycle of more than one year, the Standard encourages separate disclosure of the
(a) Physical change only. (b) Price change only. (c) Total change in value. (d) Physical change and price change.
Answer: (d)
16. Which of the following information should be disclosed under IAS 41? (a) Separate disclosure of the gain or loss relat- ing to biological assets and agricultural pro- duce.
(b) The aggregate gain or loss arising on the ini- tial recognition of biological assets and agri- cultural produce and the change in fair value less estimated point-of-sale costs of biologi- cal assets.
(c) The total gain or loss from biological assets, agricultural produce, and from changes in fair value less estimated point-of-sale costs of biological assets.
(d) There is no requirement in the Standard to disclose separately any gains or losses.
Answer: (b)