The Other Definitions the Standard Uses
Chapter Ten
Syllabus topic 6, "Key Definitions- Agriculture activity, Bearer Plant and Biological Asset."
Pages 20 to 21 of 110
Why this chapter exists
MU names three key definitions: agriculture activity, bearer plant and biological asset. Ind AS 41 defines eleven. The other eight are used constantly in the paragraphs on measurement and disclosure, and a question on any of them is a question on Unit II.
Paragraph 5 carries the agriculture-related definitions. Paragraph 8 carries the general ones. Both are bold paragraphs.
Paragraph 5: the agriculture-related terms
Agricultural produce.
Agricultural produce is the harvested product of the entity's biological assets.
Two limits are inside those seven words. It must be harvested, so a standing crop is not agricultural produce. And it must come from the entity's own biological assets, so produce bought in from another farm is simply inventory.
Biological transformation.
Biological transformation comprises the processes of growth, degeneration, production, and procreation that cause qualitative or quantitative changes in a biological asset.
Four processes, and the point made in the chapter on agricultural activity is worth repeating: degeneration is one of them. A herd that has aged, a crop that has been attacked and an orchard past its best have all undergone biological transformation, and the loss goes through profit or loss under paragraph 26.
Costs to sell.
Costs to sell are the incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxes.
This is the definition that makes the measurement basis workable, and it is narrow.
| In costs to sell | Out of costs to sell |
|---|---|
| Commission to a broker or a mandi agent | Finance costs |
| Levies by a regulatory agency or commodity exchange | Income taxes |
| Transfer taxes and duties on the sale | Transport to the market |
| General overheads and administration |
Transport is the one candidates get wrong. Transport to the market is a cost of getting the asset to the place where the price is quoted, so it belongs in arriving at fair value, not in costs to sell. Ind AS 113, Fair Value Measurement, treats transport cost as an attribute of the asset's location.
A group of biological assets.
A group of biological assets is an aggregation of similar living animals or plants.
Harvest.
Harvest is the detachment of produce from a biological asset or the cessation of a biological asset's life processes.
Paragraph 8: the general terms
Carrying amount.
Carrying amount is the amount at which an asset is recognised in the balance sheet.
Note balance sheet. That is one of the two differences from IAS 41 that Appendix 1 records.
Fair value.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See Ind AS 113 Fair Value Measurement.)
The Other Definitions the Standard Uses
Four elements to name in an answer: a selling price and not a buying price; an orderly transaction and so not a forced sale; between market participants, meaning independent, knowledgeable and willing parties; at the measurement date, so it is current and not historic.
Government grants.
Government grants are as defined in Ind AS 20.
Ind AS 20 defines them as assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity, excluding forms of assistance to which no value can reasonably be assigned and transactions with government that cannot be distinguished from the entity's normal trading transactions.
The deleted definition
Paragraph 9 prints only Refer Appendix 1. It is one of the paragraphs whose number Ind AS 41 keeps so that its numbering matches IAS 41's. It carries no requirement and there is nothing to learn in it.
All eleven in one place
| Term | Paragraph | In one line |
|---|---|---|
| Agricultural activity | 5 | Managed biological transformation and harvest, for sale or conversion |
| Agricultural produce | 5 | The harvested product of the entity's biological assets |
| Bearer plant | 5 | A living plant used to produce produce, bearing for more than one period, remote likelihood of sale as produce |
| Biological asset | 5 | A living animal or plant |
| Biological transformation | 5 | Growth, degeneration, production and procreation |
| Costs to sell | 5 | Incremental costs directly attributable to disposal, excluding finance costs and income taxes |
| Group of biological assets | 5 | An aggregation of similar living animals or plants |
| Harvest | 5 | Detachment of produce, or cessation of life processes |
| Carrying amount | 8 | The amount at which an asset is recognised in the balance sheet |
| Fair value | 8 | The price to sell in an orderly transaction between market participants at the measurement date |
| Government grants | 8 | As defined in Ind AS 20 |
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.