Biological Assets

This shall only apply to biological assets and

agricultural produce by which the entity manages
its biological transformation, i.e., the entity has an
agricultural activity.

IAS41 states that biological transformation comprises

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

Biological assets are living animals and living plants.

Agricultural produce is the harvested product of an

entity's biological assets.

Therefore, living animals and living plants from unman‐

aged sources such as ocean fishing and deforestation
is not considered as an agricultural activity nor to be
classified as biological assets or agricultural produce.

Illustrations:

1. A mango growing in a tree is considered as

agricultural produce and shall be measured at
FVCTS whereas a mango picked by a farmer shall be
considered as inventory and shall be measured at
LCNRV.

2. A mango tree by whose mangos were regularly

2. A mango tree by whose mangos were regularly
harvested shall be considered as PPE. But a mango
tree that has a dual use, i.e., its wood would be
chopped and can be sold in the market, shall be
considered as biological asset.

3. A chicken intended only to lay eggs shall be

considered as biological asset because other than that
its meat can still be sold in the market.

4. The land by which agricultural activity is held shall

not be considered as biological asset but as a PPE.

Initial & Subsequent Measurement

Biological asset shall be initially and subsequently

measured at fair value less cost of disposal (FVCTS).

Agricultural produce shall be measured at fair value

less cost of disposal (FVCTS) only at the point of
harvest, thereafter, it shall be considered as an
inventory to be measured at lower of cost and net
inventory to be measured at lower of cost and net
realizable value (LCNRV).

Cost of disposal an incremental cost directly

attributable to the diposal of an asset. It excludes
freight-out, finance costs, and income taxes.

Fair value xx
Less: Cost of diposal, such as:
Sales commissions (xx)
Transfer taxes (xx)
Initial/subsequent measurement xx
of biological asset

Changes in fair value shall either decrease or increase

the carrying amount of the biological asset. The
change attributable to either physical or price change
is reflected to the profit/loss statement.
1. Price change
2. Physical change
3. Increase of FV due to addt'l purchase or birth
4. (Decrease of FV due to sale or death)

The above changes in fair value when combined

together will result to the total change in fair value.
Sample:
Mang Kulas is engaged in raising cows and pigs. He
has a farm land worth of Php. 800,000.00 where he
raise his 5 cows and 5 pigs. Beginning January 1,
2018, the cows are 5 years old and the pigs are 3 years
old. On June 30, 2018, two pigs gave birth to a total
of 12 piglets by which only 8 survived. Sometime in
December, a cow was stolen from his farm.

Moreover, the following are the fair market values at

each given date:

1/1/18
Cow, 5y/o 16,200
Pig, 3y/o 8,900
6/31/18
Piglet, newborn 850
12/31/18
Cow, 5y/o 17,100
Cow, 5y/o 17,100
Cow, 6y/o 18,000
Pig, 3y/o 9,300
Pig, 4/o 10,200
Piglet, newborn 970
Piglet, 1/2 y/o 1,200

1. What is the price change in fair value on

December 31, 2018?
2. What is the physical change in fair value on
December 31, 2018?
3. What is the total change in fair value to be
disclosed for the current year?
4. Assume that the estimated dealer's fee on
disposal of asset is Php. 2,000.00, what is the
amount of biological assets to be reported in his
statement of financial position?
Computations:
Non scholæ sed vitae discimus.
Last modified: 8:42 PM