Biological Assets

Accounting Print Email

International Accounting Standard 41 (IAS 41) defines biological asset as “a living animal or plant”.

Accounting and financial reporting practices categorize many assets such as property, machines, equipment, buildings, and other assets. “Biological assets” is one of the categories of assets. Biological assets include plants and animals. The common examples of biological assets include animals such as goats, sheep, cows, buffaloes, calves, and fish. Biological assets include plants such as vegetables, crops, vineyards, trees, and fruit orchards.

The biological assets keep on transforming. They grow, degenerate, and produce. As a result quantitative or qualitative changes occur in the nature of biological assets. Such changes are known as biological transformation. The harvested product of changes in the nature of biological assets is known as agricultural produce. The examples of agricultural produce include milk, mutton, beef, fruits, coffee beans etc.

Usually biological assets are of primary importance in the farms business. Farm businesses generate income from its biological assets therefore these biological assets need to be recognized in balance sheet and the revenues from them also need to be recognized in income statement.

According to IAS 41 the biological assets should be recognized in the balance sheet when the following criteria are fulfilled:

  • The business controls the biological assets because of a past event
  • It is probable that the business will get future economic benefits from them
  • Fair value or cost of the biological asset can be measured reliably

IAS 41 requires that the biological assets should be recognized at their fair value minus point-of-sale costs. This method should be used when initially measuring the biological assets and then at the every balance sheet date.

Agriculture produce should also be measure by using the above method. Agriculture produce should be measured at the time of harvest.

The fair value of a biological asset is the amount at which it can be sold to a knowledgeable and willing person or party. Usually this is market value of a biological asset in a relevant and reliable active market. The point-of-sale costs include broker’s commission, transfer taxes and duties, and commodity exchanges. Transportation costs are not included in the these costs.
Quote Guest, 21 September, 2015
You should put some problem examples so that we can clearly understand what biological asset is.
Quote Tony, 22 October, 2015
Why transportation costs are excluded from the poin -of -sales costs of biological assets?
Quote Guest, 7 June, 2016
what is the journal entry of baby pig.we treat as biological asset or inventory?
Quote Vit. A., 7 June, 2016
Guest wrote:
what is the journal entry of baby pig.we treat as biological asset or inventory?
Biological asset.
Quote Guest, 15 July, 2016
how about the aquaculture assets.. like broodstocks for fry business..what is the treatment for those assets as well as its valuation
Quote Guest, 7 December, 2016
Can establishment costs of a forestry plantation be capitalised towards the value of the biological asset?

Can this cost then be depreciated and if yes, how?
Quote Guest, 15 February, 2017
How are biological assets classified as ? are they current or fixed in nature?
Some bio assets such as parent chicken stock are classified as current assets in balance sheets however their life span is 1.5 years. Further these are used for egg laying purpose which are further  traded
in the retail market. since bio assets are non current there should be a third category of assets in the balance sheet
Quote Guest, 9 November, 2017
Yes i have the same question like that one above
Like me  i have the laying chickens at point of lay now, how do i account for them in the balance sheet as well as in the income statement which value am i going to put
Quote Guest, 21 December, 2017
what if a company acquires a horse to be used as means of transportation/ vehicle? in what standard will it fall? how should it be measured and recognize?
Quote Guest 1, 31 January, 2020
why transportation cost excluded from point of sale costs?
Quote Vit. A., 31 January, 2020
Guest 1 wrote:
why transportation cost excluded from point of sale costs?

Because this is "Distribution costs" (if concerning sales but not inventory purchase).
Quote Guest, 27 February, 2020
I have a DOG which  i bought for security purpose with no intention of selling it ,how do i treat it in financial statement
Quote Guest, 25 June, 2020
I trying to implement first time IFRS SME,
We have flowers farm. How I'm  going to treat unharvested flower during the year end?
Quote Guest, 21 August, 2020
If no slaughter and others activity just acquisition bio asset inmmature and sales what is selling expenses?

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