Unit 3: Agriculture

Question 1

[T/F] IAS 41 does not apply to:

(a) land related to agricultural activity
(b) bearer plants related to agricultural activity
(c) government grants related to bearer plants
(d) intangible assets related to agricultural activity
(e) right-of-use assets arising from a lease of land related to agricultural activity

Answer 1

True.

IAS 41 - Agriculture

Question 2

IAS 41 is applied to agricultural produce, which is the harvested produce of the entity’s biological assets, at the point of harvest. Thereafter, IAS 2 Inventories or another applicable Standard is applied

Answer 2

True.

Question 3

______ is the management by an entity of the biological transformation and harvest of biological assets for sale or for conversion into agricultural produce or into additional biological assets.

Answer 3

Agricultural activity

Question 4

A _________ is a living animal or plant.

Answer 4

biological asset

Question 5

________ comprises the processes of growth, degeneration, production, and procreation that cause qualitative or quantitative changes in a biological asset.

Answer 5

Biological transformation

Question 6

_________ are the incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxes.

Answer 6

Costs to sell.

Question 7

A ____________ is an aggregation of similar living animals or plants.

Answer 7

group of biological assets

Question 8

_______ is the detachment of produce from a biological asset or the cessation of a biological asset’s life processes.

Answer 8

Harvest

Question 9

When bearer plants are no longer used to bear produce they might be cut down and sold as scrap; such incidental scrap sales would not prevent the plant from satisfying the definition of a bearer plant.

Answer 9

True.

Question 10

Produce growing on bearer plants is a biological asset.

Answer 10

True.

Question 11

A biological asset shall be measured on initial recognition and at the end of each reporting period at its FV less costs to sell, except for the case described in paragraph 30 where the fair value cannot be measured reliably.

Answer 11

True.

Question 12

Agricultural produce harvested from an entity’s biological assets shall be measured at its _______ at the point of harvest.

Answer 12

fair value less costs to sell

Question 13

An entity shall recognise a biological asset or agricultural produce when, and only when…

Answer 13

(a) the entity controls the asset as a result of past events;
(b) it is probable that future economic benefits associated with the asset will flow to the entity; and
(c) the fair value or cost of the asset can be measured reliably.

Question 14

For IAS 41 (Agriculture), the future benefits are normally assessed by measuring the significant physical attributes.

Answer 14

True.

Question 15

A gain or loss arising on initial recognition of agricultural produce at fair value less costs to sell shall be included in profit or loss for the period in which it arises.

Answer 15

True.

Question 16

A gain or loss arising on initial recognition of a biological asset at fair value less costs to sell and from a change in fair value less costs to sell of a biological asset shall be included in profit or loss for the period in which it arises.

Answer 16

True.

Question 17

There is a presumption that fair value can be measured reliably for a biological asset. In such a case, that biological asset shall be measured at its cost less any accumulated depreciation and any accumulated impairment losses. Once the fair value of such a biological asset becomes reliably measurable, an entity shall measure it at its fair value less costs to sell.

Answer 17

True.

Question 18

An unconditional government grant related to a biological asset measured at its fair value less costs to sell shall be recognised in profit or loss only when ________.

Answer 18

the government grant becomes receivable

Question 19

An entity shall recognise the government grant in profit or loss when, and only when, the conditions attaching to the government grant are met.

Answer 19

True.

Question 20

_______ biological assets are those that are to be harvested as agricultural produce or sold as biological assets. Examples are livestock intended for the production of meat, livestock held for sale, fish in farms, crops such as maize and wheat, etc.

Answer 20

Consumable BA

Question 21

Biological assets may be classified either as _____ biological assets or _____ biological assets.

Answer 21

mature; immature

Question 22

Agricultural land is not deemed a BA but instead as PPE (IAS 16).

Answer 22

True.

Question 23

In agricultural activity, control may be evidenced by, for example, legal ownership of cattle and the branding or otherwise marking of the cattle on acquisition, birth, or weaning. The future benefits are normally assessed by measuring the significant physical attributes.

Answer 23

True.

Question 24

Contract prices are not necessarily relevant in measuring fair value; as a result, the fair value of a biological asset or agricultural produce is not adjusted because of the existence of a contract.

Answer 24

True.

Question 25

An entity [does/does not] include any cash flows for financing the assets, taxation, or re‑establishing biological assets after harvest.

Answer 25

does not include

Question 26

Cost may sometimes approximate fair value of BA.

Answer 26

True; particularly when:
particularly when:
(a) little biological transformation has taken place since initial cost incurrence, or
(b) the impact of the biological transformation on price is not expected to be material.

Question 27

There is a presumption that fair value can be measured reliably for a biological asset. However, that presumption can be rebutted only on initial recognition for a biological asset for which quoted market prices are not available and for which alternative fair value measurements are determined to be clearly unreliable. In such a case, that biological asset shall be measured at _______________.

Answer 27

its cost less any accumulated depreciation and any accumulated impairment losses

Question 28

Which of the following is not true?

a) COD include costs that are necessary for a sale to occur but that would not otherwise arise, such as transport costs, finance costs and income taxes;
b) a BA shall be measured initially and at each EORP at FV less COD;
c) agri. produce shall be measured at FV - COD at the point of harvest.

Answer 28

A. COD include costs that are necessary for a sale to occur but that would not otherwise arise, [excluding] transport costs, finance costs and income taxes.