The Biological Asset
Chapter Nine
Syllabus topic 6, "Key Definitions- Agriculture activity, Bearer Plant and Biological Asset."
Pages 18 to 19 of 110
The definition
Paragraph 5, in bold, and it is the shortest definition in the standard:
A biological asset is a living animal or plant.
Five words. Everything else is worked out from the scope and from the other definitions.
Living is the whole test. A dead animal is not a biological asset, it is agricultural produce or inventory. A felled tree is not a biological asset, it is agricultural produce. A seed in a sack is inventory; the plant it becomes in the ground is a biological asset.
What it does and does not include
| Item | Biological asset? |
|---|---|
| A standing wheat crop | Yes |
| A dairy herd | Yes |
| Sheep | Yes |
| Fish in a farm pond | Yes |
| Trees in a timber plantation | Yes |
| Standing sugarcane | Yes |
| Tea leaves growing on a bush | Yes, paragraph 5C |
| The tea bush itself | No, a bearer plant, Ind AS 16 |
| Harvested wheat in the godown | No, agricultural produce, then Ind AS 2 |
| Milk in the tank | No, agricultural produce |
| Wool shorn from the sheep | No, agricultural produce |
| Seed in a sack awaiting sowing | No, inventory |
| The land the crop grows in | No, paragraph 2(a) |
| A tractor | No, plant and machinery, Ind AS 16 |
The two classifications the standard uses
Neither appears in paragraph 5. Both appear in the disclosure paragraphs, and they are asked about often enough to be learned here.
Consumable and bearer biological assets. Paragraph 44 defines them:
Consumable biological assets are those that are to be harvested as agricultural produce or sold as biological assets. Examples of consumable biological assets are livestock intended for the production of meat, livestock held for sale, fish in farms, crops such as maize and wheat, produce on a bearer plant and trees being grown for lumber. Bearer biological assets are those other than consumable biological assets; for example, livestock from which milk is produced and fruit trees from which fruit is harvested. Bearer biological assets are not agricultural produce but, rather, are held to bear produce.
A bearer biological asset is not the same thing as a bearer plant. A dairy cow is a bearer biological asset and it is a biological asset under Ind AS 41, measured at fair value less costs to sell. A tea bush is a bearer plant and it is out of the standard entirely. The standard drew the bearer plant exclusion for plants only; animals held to bear produce stay inside.
Mature and immature biological assets. Paragraph 45:
Mature biological assets are those that have attained harvestable specifications (for consumable biological assets) or are able to sustain regular harvests (for bearer biological assets).
A heifer that has not yet calved is immature. A cow in milk is mature. A wheat crop three weeks from harvest is immature. Paragraph 43 encourages the two splits to be disclosed because they say something about the timing of future cash flows.
The Biological Asset
A group of biological assets
Paragraph 5 defines it:
A group of biological assets is an aggregation of similar living animals or plants.
This is the unit most of the standard's disclosures work in. Paragraph 41 requires a description of each group. A dairy company's groups might be milking cows, dry cows, heifers and calves; a plantation's might be tea leaf on mature bushes and tea leaf on young bushes.
Where a biological asset comes from and where it goes
In. By purchase, by birth, by planting, or acquired in a business combination.
Out. By sale, by death, by harvest, or by reclassification when it stops being living.
Harvest is the exit that matters, because it is the moment the asset stops being a biological asset and becomes agricultural produce. The definition in paragraph 5 is precise about it:
Harvest is the detachment of produce from a biological asset or the cessation of a biological asset's life processes.
Two limbs. Detachment covers picking fruit, shearing wool, milking a cow and felling a tree. Cessation of life processes covers slaughtering an animal. Both are harvest, and at both, paragraph 13 measures the produce at fair value less costs to sell.
The three-stage picture
Every question on scope reduces to this.
- Living, managed, growing. Biological asset. Ind AS 41. Fair value less costs to sell at every reporting date.
- The instant of harvest. Agricultural produce. Ind AS 41 measures it once, at fair value less costs to sell, and that figure becomes its cost.
- After harvest. Ind AS 2 or another standard. Ind AS 41 has finished.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.