Agriculture

Question 1

This standard applies to which accounting issues

Answer 1

A) biological assets (other than bearer plants)
B) agricultural produce at the point of harvest
C) government grants for agriculture

Question 2

What is a biological asset and give me an example?

Answer 2

A biological asset is a living animal or plant. Examples include sheep, trees in a timber plantation, dairy, cattle, cotton plants, tobacco plants, etc.
While bearer plants are not included within this definition themselves, produce growing ON bearer plants are considered biological assets.

Question 3

What are vines classified as? What are grapes while on the vine classified as?

Answer 3

Vines are considered biological assets as it is a plant. Grapes, while on the vine are considered agricultural produce, since it is at the point of harvest.

Question 4

What are vines classified as? What are grapes while on the vine classified as?

Answer 4

Vines are considered biological assets as it is a plant. Grapes, while on the vine are considered agricultural produce, since it is at the point of harvest.

Question 5

When would it be classified as inventory?

Answer 5

Products that are a result of processing agriculture produce are considered inventories must be accounted for under IAS2. for example, wine would be classified as inventory since it is the product resulting of the processing after harvest.

Question 6

What is a agriculture produce?

Answer 6

harvested produce of an entities biological assets. Examples include wool, felled trees, milk, harvested cotton, picked leaves and fruit, etc.

Question 7

What is a bearer plant?

Answer 7

Must meet all of the following criteria:
1. Used in the production and supply of agricultural produce.
2. expected to bear produce for more than one period, and;
3. Remote likelihood of being sold as agricultural produce, except for incidental scrap sales.

Question 8

How should bearer plants be accounted for?

Answer 8

Bearer plants shall be accounted for under IAS 16

Question 9

What is the recognition criteria of a biological asset or agricultural product?

Answer 9

You can only recognize a biological acid or agricultural product when all of the following are met:
1. The entity controls the asset as a result of past events.
2. It is probable that future economic benefits associated with the asset will flow into the entity
3. The biological asset or agricultural product can be measured reliably.

Question 10

To be able to recognize a biological asset, the entity needs to obtain control over the asset. How do you know when an entity obtains control?

Answer 10

Instances of control over a biological, I said include;
1. Legal ownership and title
2. Branding of the asset.
3. Birth of a new animal.

Question 11

How do you measure biological assets under IFRS ? ( IAS 41)

Answer 11

Measure at fair value less costs to sell.
There is a rebuttable presumption that the fair value of a biological asset is determinable . The presumption can be rebutted on initial recognition only if not determinable and no quoted market is available, it can be measured at cost less accumulated depreciation/amortization (similar to PPE)

Question 12

Can you measure a biological asset that was once measured at fair value subsequently at cost

Answer 12

Once the fair value becomes available, must use it subsequently until disposal. You cannot change to cost.

Question 13

How how do you count for a government grant related to agriculture?

Answer 13

1. A unconditional grant related to biological assets is measured at fair value less costs to sell —>recognize in P&L when receivable.
2. A conditional grant related to biological assets is measured at fair value less costs to sell —> recognize in P&L when conditions attached to the grant are met
3. If a grant is extended for a biological asset that is measured at cost less accumulated amortization, apply IAS 20.
4. Government grants relating to bearer plants —> IAS 20

Question 14

What are dual plants and how do you account for them?

Answer 14

Dual use plants are used for either production (to bear agricultural produce) or for direct sale as an agricultural produce, account for them under ias 41

Question 15

Under ASPE, how do you record and measure an agricultural produce?

Answer 15

An accounting policy would need to be made to either measure the biological inventory at either 1) cost model: include I location of 0H in the cost. Need to make accounting policy to either use a. Full cost or b. Input costs
2) NRV Model ( measure at NRV and any fluctuation in NRV would be treated as a gain or loss in the P&L.

Question 16

If a tree is grown for lumber, how would it be accounted for?

Answer 16

It would be accounted for under IAS 41, and not as a bearer plant given that the tree itself is going to be harvested as agricultural produce.

Question 17

How would you account for a tree whose main purpose is to supply fruit and eventually the tree will be cut down and used for firewood once it ceases to bear fruit?

Answer 17

It would still be classified as a bearer plant, given that it is considered incidental scrap sale.

Question 18

How would you account for land related to agricultural activity?

Answer 18

Lines used by an entity for agricultural purposes would be accounted for under the PPE standard. IAS 16.

Question 19

How would land owned by a third-party and rented to an entity for agricultural purposes be accounted for?

Answer 19

Land owned by a third-party and rented to an entity for agricultural purposes would be accounted for as investment property. IAS 40.

Question 20

Do you depreciate biological assets

Answer 20

No

Question 21

What are costs to sell?

Answer 21

Costs to sell are the incremental cost directly attributable to the disposal of an asset, such as commission fees, transportation costs, etc. Exclude finance cost and income taxes.