CAF 7 – IAS 41

IAS 41 Agriculture 10
Page | 1
INTRODUCTION
SCOPE
IAS 41 Agriculture covers the following agricultural activities:
 biological assets, except for bearer plants;
Included
 agricultural produce at the point of harvest; and
 government grants for agriculture (in certain situations).
IAS 41 does not apply to:
 the harvested agricultural product (IAS 2 Inventory applies);
 land relating to the agricultural activity (IAS 16 or IAS 40 applies);
Excluded  bearer plants related to agricultural activity (however, IAS 41 does
apply to the produce on those bearer plants).
 intangible assets related to agricultural activity (IAS 38 Intangible
assets applies).

DEFINITIONS
The management by an entity of the biological transformation and harvest
of biological assets:
Agricultural
 for sale; or
activities
 into agricultural produce; or
 into additional biological assets.
Biological
A living animal or plant, such as sheep, cows, plants, trees and so on.
asset
Biological The processes of growth, production, degeneration and procreation that
transformation cause changes in the quality or the quantity of a biological asset
Agricultural Agricultural produce is the harvested product of the entity’s biological
produce assets.
The detachment of produce from a biological asset or the cessation of a
Harvest
biological asset’s life.
Illustration: A farmer is involved in agricultural activity of raising and selling lambs and wool.
 A farmer has a field of lambs (‘biological assets’).
 As the lambs grow they go through biological transformation.
 As sheep they are able to procreate, and lambs will be born (additional biological
assets) and the wool from the sheep provides a source of revenue for the farmer
(‘agricultural produce’).
 Once the wool has been sheared from the sheep (‘harvested’), IAS 2 requires that it
be accounted for as regular inventory.

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 CAF 7 – IAS 41

A bearer plant is a living plant that:

 is used in the production or supply of agricultural produce;
 is expected to bear produce for more than one period; and
 has a remote likelihood of being sold as agricultural produce,
except for incidental scrap sales.
Page | 2
Bearer plant Plants such as tea bushes, grape vines, oil palms and rubber trees,
usually meet the definition of a bearer plant and are within the scope of
IAS 16. However, the produce growing on bearer plants, for example, tea
leaves, grapes, oil palm fruit and latex, is within the scope of IAS 41.

Note that there is no “animal” equivalent of a bearer plant. Thus, cows

kept for milk are within the scope of IAS 41.

Products that result from

Biological assets Agricultural produce
processing after harvest
sheep wool yarn, carpet etc.
trees in a timber plantation felled trees logs, lumber
dairy cattle milk cheese
cotton plants harvested cotton thread, clothing etc.
sugarcane harvested cane sugar
tobacco plants picked leaves cured tobacco
tea bushes picked leaves tea
fruit tress picked fruit processed fruit
oil palm picked fruit palm oil
rubber trees harvested latex rubber products

RECOGNITION
An entity should recognise a biological asset or agricultural produce when
(and only when):
 the entity controls the asset as a result of past events
Criteria
 it is probable that future benefits will flow from the asset to the entity,
and
 the fair value or cost of the asset can be measured reliably.

ACCOUNTING TREATMENT
MEASUREMENT
A biological asset should be measured initially and subsequently at the
end of each reporting period at its fair value minus cost to sell (unless the
Biological fair value cannot be measured reliably).
assets
The gain or loss arising on initial recognition and subsequent revaluation
should be included in profit or loss for the period in which it arises.
Agricultural produce harvested from an entity’s biological assets is
Agricultural measured at its fair value minus cost to sell.
produce The gain or loss on initial recognition is included in the profit or loss for
that period.

Latest update: May 2020

 CAF 7 – IAS 41

Costs to sell are the incremental costs directly attributable to the disposal of
an asset, excluding finance costs and income taxes. These include
Cost to sell
commissions to brokers and dealers, levies to regulators, transfer taxes and
duties.
Fair value is the quoted price in an active market. It is presumed that fair
The use of values can be measured reliably for biological assets. If this is not so, the Page | 3
cost model biological asset should be measured at its cost minus any accumulated
depreciation or impairment.
Illustration: Using the earlier example of a sheep farmer:
 Lambs should initially be measured when they are born at their fair value minus costs
to sell.
 As they grow and their value changes, this gain or loss should be reflected in the
biological asset value and also in profit and loss.
 The sheep may be used for obtaining wool. Once the wool has been sheared from
the sheep, as an agricultural produce the wool should be valued at fair value minus
costs to sell.
 If the wool is then turned into yarn or carpet its value is then transferred to inventory
and IAS 2 will provide any further accounting rules.

GOVERNMENT GRANT
Agricultural entities (for example, farms) often benefit from government grants in the form of
cash payments.
An unconditional grant relating to a biological asset that is being measured
Unconditional
at fair value less costs to sell should be recognised as income when the
grant
grant becomes receivable.
A grant may be dependent on certain conditions being met. For example,
Conditional the entity may be asked not to engage in a specific agricultural activity. In
grant such cases, the grant should be recognised only when the conditions are
met.
Apply IAS 20, If the biological asset has been measured at cost because fair value
if cost model could not be measured reliably, then the requirements of IAS 20
is used Accounting for government grants should be applied.

DISCLOSURE REQUIREMENTS
The IAS 41 disclosure requirements include the following:
 the aggregate gain or loss arising during the current period on initial
recognition of biological assets and agricultural produce and from
the change in fair value less costs to sell of biological assets.
 a description of each group of biological assets;
 information about biological assets whose title is restricted or that
General
are pledged as security
 commitments for development or acquisition of biological assets
 financial risk management strategies
 reconciliation of changes in the carrying amount of biological assets,
showing separately changes in value, purchases, sales, harvesting,
business combinations, and foreign exchange differences;

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 CAF 7 – IAS 41

 description of the assets

 an explanation of the circumstances
If fair value
 if possible, a range within which fair value is highly likely to lie
cannot be
 depreciation method
measured
 useful lives or depreciation rates
reliably
Page | 4  gross carrying amount and the accumulated depreciation, beginning
and ending
Fair value
If the fair value of biological assets previously measured at cost now
become
becomes available, certain additional disclosures are required.
available
Related to Disclosures relating to government grants include the nature and extent of
government grants, unfulfilled conditions, and significant decreases expected in the level
grant of grants.

SYLLABUS

Reference Content/Learning outcome

B4 IAS 41 Agriculture
LO2.4.1 Understand accounting and disclosure requirements for agriculture as per IAS
41
Proficiency level: 2
Testing level: 1

Past Paper Analysis

A14 S15 A15 S16 A16 S17 A17 S18 A18 S19 A19 S20
- 051
Objective Type 01 01
1
Total Marks 08 (including IAS 21)

PRACTICE Q&A
Sr.# Description Marks Reference
QUESTION BANK
1H Gujranwala Foods Limited – SPL and theory 13 QB
2C Helios Group – consolidation, presentation, theory 17 QB
3H The Dairy Company – theory and measurement 07 QB
4H Fatima Limited – classification 04 QB
5H Zoha Limited – extracts of financial statements 06 QB
6H Mishall Limited – Valuation and measurement 15 QB

Latest update: May 2020

 CAF 7 – IAS 41

QUESTION 01
Gujranwala Foods Limited has the following information in its records for the year ended 31
January 2017:
Chickpea Apricot Dates Onion
Rs.’000 Rs.’000 Rs.’000 Rs.’000
Sales 200 300 750 250
Page | 5
Purchases 75 150 300 80
Subsidies 40 80 60 60
Own consumption 45 40 75 20
Opening Inventory 40 40 70 -
Closing Inventory 60 110 300 60

The farm expenses for the period 1 February 2016 to 30 April 2017 are as follows:
Rs.
Casual labour 20,000
Regular workers 30,000
Land preparation and clearing costs 80,000
Hire of tractors 60,000

The farm’s non-current assets for the year ended 31 January 2017 were as follows:
Rs.
Farm’s irrigation at cost 800,000
Farm’s implement and equipment 400,000

Additional Information:
(i) Farm’s irrigation costs are to be written off over 10 years.
(ii) Farm’s implement and equipment were purchased on 31 April 2016 and these are to
be depreciated at 20% per annum.

Required
(a) Prepare Gujranwala Foods Limited’s gross output and statement of profit or loss for
the year ended 31 January 2017. (10)
(b) In accordance with IAS 41 on Agriculture, you are required to define the following
terms:
(i) Biological assets
(ii) Biological transformation
(iii) Harvest (03)

QUESTION 02
Helios Ltd is an agricultural production company.

Helios Ltd acquired 70% of the ordinary shares of Sol Ltd, an agricultural based company for
Rs. 600 million on 1 January 2015, when the reserves of Sol Ltd were Rs. 300 million.

At the date of acquisition, the fair value of the non-controlling interest in Sol Ltd was Rs. 160
million.

The fair values of the net assets of Sol Ltd are the same as their carrying values with the
exception of a plot of agricultural land. This land was carried by Sol Ltd at its cost of Rs. 300
million. It was estimated at a fair value of Rs. 360 million.

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 CAF 7 – IAS 41

Statements of financial position of as at 31 December 2016

Helios Ltd Sol Ltd
Rs.’000 Rs.’000
Non-current assets:
Property, plant and equipment 600,000 450,000
Investments 800,000 -
Page | 6 Current assets:
Inventories 160,000 150,000
Trade & other receivables 120,000 280,000
Cash and cash equivalent 20,000 50,000
Total assets 1,700,000 930,000

Equity:
Ordinary share capital 160,000 120,000
Share premium 40,000 20,000
Reserves 590,000 500,000
Non-current liabilities:
Loan notes 600,000 170,000
Current liabilities
Trade & other payables 310,000 120,000
Total equity & liabilities 1,700,000 930,000

Additional information:
Immediately after acquisition, the following agricultural products were procured and included
in property, plant and equipment and inventories of Sol Ltd as at 31 December 2016:
(i) Included in property, plant and equipment of Sol Ltd are: Rs.’000
Dairy livestock – immature 40,000
Dairy livestock – mature 50,000

(ii) Included in inventories of Sol Ltd is:

Cotton plants 20,000

Required
(a) Prepare the consolidated statement of financial position for Helios Ltd group as at 31
December 2016 as expected for an agricultural business. (15)
(b) State how to measure agricultural products harvested by an entity in line with the
requirements of IAS 41 on Agriculture. (02)

QUESTION 03
(i) Briefly explain the term “biological asset” and state when a biological asset is
recognised in the financial statements under the International Financial Reporting
Standards. (03)

(ii) The Dairy Company (TDC) owns three farms and has a stock of 3,200 cows. During
the year ended 30 June 2015, 300 animals were born, all of which survived and were
still owned by TDC at year-end. Of those, 225 are infants whereas 75 are nine-month
old having market values of Rs. 26,000 and Rs. 53,000 per animal respectively. The
incidental costs are 2% of the transaction price. (04)

Required:
In accordance with the requirements of the International Financial Reporting Standards,
discuss how the gain in respect of the new born cows should be recognized in TDC’s
financial statements for the year ended 30 June 2015. (Show all necessary computations)

Latest update: May 2020

 CAF 7 – IAS 41

QUESTION 04
Fatima Limited on adoption of IAS 41 has reclassified certain assets as biological assets.
The total value of the group’s forest assets is Rs.3,400 million comprising:
Rs. in million
Freestanding trees (for timber sale) 2,500
Land under trees 500
Roads in forests 400 Page | 7
3,400

Required:
Show how the forests would be classified in the financial statements. (04)

QUESTION 05
Zoha Limited has these balances in its financial records:
Rs.
Value of biological asset at cost 31/12/2018 600
Fair valuation surplus on initial recognition at fair value 31/12/2018 700
Change in fair value to 12/31/2019 due to growth and price fluctuations 100
Decrease in fair value due to harvest 90

Required:
Show how these values would be incorporated into the statement of financial position and
statement of comprehensive income at December 31, 2019. (06)

QUESTION 06
Mishall Limited a public limited company, Dairy, produces milk on its farms. It produces 30%
of the country’s milk that is consumed. Dairy owns 450 farms and has a stock of 210,000
cows and 105,000 heifers. The farms produce 8 million kilograms of milk a year, and the
average inventory held is 150,000 kilograms of milk. However, the company is currently
holding stocks of 500,000 kilograms of milk in powder form.

At December 31, 2018, the herds are:

 210,000 cows (3 years old), all purchased on or before January 1, 2018
 75,000 heifers, average age 1.5 years, purchased on June 1, 2018
 30,000 heifers, average age 2 years, purchased on January 1, 2018

No animals were born or sold in the year. The unit values less estimated selling costs were:
Rs.
1-year-old animal at December 31, 2018 32
2-year-old animal at December 31, 2018 45
1.5-year-old animal at December 31, 2018 36
3-year-old animal at December 31, 2018 50
1-year-old animal at January 1, 2018 and June 1, 2018 30
2-year-old animal at January 1, 2018 40

The company has had problems during the year: Contaminated milk was sold to customers.
As a result, milk consumption has gone down. The government has decided to compensate
farmers for potential loss in revenue from the sale of milk. This fact was published in the
national press on November 1, 2018. Dairy received an official letter on December 10, 2018,
stating that Rs.5 million would be paid to it on March 2, 2019.

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 CAF 7 – IAS 41

The company’s business is spread over different parts of the country. The only region
affected by the contamination was Lahore, where the government curtailed milk production
in the region. The cattle were unaffected by the contamination and were healthy.

The company estimates that the future discounted cash flow income from the cattle in the
Lahore region amounted to Rs.4 million, after taking into account the government restriction
Page | 8 order. The company feels that it cannot measure the fair value of the cows in the region
because of the problems created by the contamination. There are 60,000 cows and 20,000
heifers in the region. All these animals had been purchased on January 1, 2018.

A rival company had offered Dairy Rs.3 million for these animals after selling costs and
further offered Rs.6 million for the farms themselves in that region. Dairy has no intention of
selling the farms at present. The company has been applying IAS 41 since January 1, 2018.

Required:
Advise the directors on how the biological assets and produce of Dairy should be accounted
for under IAS 41, discussing the implications for the financial statements. (15)

Latest update: May 2020

 CAF 7 – IAS 41

ANSWER 01
Part (a)
Chickpea Apricot Dates Onion Total
Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000
Sales: 200 300 750 250 1,500
Add: Subsidies 40 80 60 60 240
Page | 9
Own consumption* 45 40 75 20 180
285 420 885 330 1920
Cost of sales
Opening inventory 40 40 70 - 150
Add: Purchases 75 150 300 80 605
Closing inventory (60) (110) (300) (60) (530)
55 80 70 20 225
Gross output value 230 340 815 310 1,695
Less expenses:
Casual labour 16
Regular workers 24
Land preparation 64
Hire of tractors 48
Depreciation: irrigation 80
Depreciation: farms equipment 60
(292)
1,403
*alternatively could have been deducted from costs.

Workings:
Casual labour 12/15 x Rs. 20,000 Rs. 16,000
Regular workers 12/15 x Rs. 30,000 Rs. 24,000
Land preparation 12/15 x Rs. 80,000 Rs. 64,000
Hire of tractors 12/15x Rs. 60,000 Rs. 48,000

Depreciation:
Irrigation cost Rs. 800,000/10 Rs. 80,000
Farm equipment 20% x 400,000 x 9/12 Rs. 60,000
Part (b)
(i) Biological assets are living plants and animals.
(ii) Biological transformation relates to the process of growth and degeneration that
can cause changes of a quantitative or qualitative nature in a biological asset.
(iii) Harvest is the detachment of produce from a biological asset or cessation of a
biological asset’s life process.

ANSWER 02
Helios Ltd
Consolidated statement of financial position as at 31 December 2016
Non-current assets Rs.’000 Rs.’000
Biological assets - Dairy livestock: Immature 40,000
- Dairy livestock: mature 50,000
- Plantation 20,000 110,000
Property, plant and equipment
(600,000 + 450,000 + 60,000 – 40,000 – 50,000) 1,020,000
Investments (800,000 – 600,000) 200,000
Goodwill (W3) 260,000
1,590,000

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 CAF 7 – IAS 41

Current assets
Inventories (160,000 + 150,000 – 20,000) 290,000
Trade receivables (120,000 + 280,000) 400,000
Cash and cash equivalents (20,000 + 50,000) 70,000 760,000
2,350,000
Page | 10
Equity
Ordinary shares capital 160,000
Share premium 40,000
Group reserves (W5) 730,000
Parent equity 930,000
Non-controlling interests (W4) 220,000
1,150,000
Non-current Liabilities
Loan notes (600,000 + 170,000) 770,000
Current liabilities
Trade payables (310,000 + 120,000) 430,000 1,200,000
Total equity and liabilities 2,350,000

Workings (W)
(1) Group Structure
Helios Ltd 70%
NCI 30% Sol Ltd

(2) Net assets of Sol Ltd

Acquisition date Reporting Post
date acquisition
Rs.’000 Rs.’000 Rs.’000
Ordinary shares 120,000 120,000 -
Share premium 20,000 20,000 -
Reserves 300,000 500,000 200,000
Fair value adjustment (land) 60,000 60,000
Fair value of net assets 500,000 700,000 200,000

(3) Goodwill in Sol Ltd

Rs.’000
Purchase consideration 600,000
Fair value of NCI at acquisition 160,000
760,000
Fair value of net assets at acquired (500,000)
Goodwill 260,000

(4) NCI at reporting date

Rs.’000
Fair value of NCI at acquisition 160,000
Share of post-acquisition reserves (30% x Rs. 200,000) 60,000
220,000

(5) Group reserves

Rs.’000
Helios Ltd 590,000
Share of post-acquisition (70% x Rs. 200,000) 140,000
730,000

Latest update: May 2020

 CAF 7 – IAS 41

Part (b)
Measurement of harvested agricultural products. Agricultural products harvested from an
entity’s biological assets shall be measured at its fair value less costs to sell at the point of
harvest. Such measurement is the cost at that date when applying it as inventories or
another applicable standard.

ANSWER 03 Page | 11
(i) “Biological asset” is a living animal or plant. An entity shall recognize a biological
asset if all the following conditions are met:
 The entity controls the asset as a result of past event;
 It is probable that future economic benefits associated with the asset will flow
to the entity;
 The fair value or cost of the asset can be measured reliably.

(ii) The new born cows are biological assets and should be measured at fair value less
costs to sell, both on initial recognition and at each reporting period.

The gains on initial recognition and the gains from change in this value should be
recognized in profit or loss for the period in which it arises. The total gains to be
recognized in the year ended 30 June 2015 is as follows:
Rupees
New born [26,000 × 225 × (100%-2%)] 5,733,000
9 month old [53,000 × 75 × (100% - 2%)] 3,895,500
9,628,500

ANSWER 04
Fatima Limited
Extracts of Statement of Financial Position
As at 31 December 2018
Rs. in
million
Current assets
Biological assets - Freestanding trees 2,500
Non-current assets
Land under trees 500
Roads in forests 400
3,400

ANSWER 05
Zoha Limited
Extracts of Statement of Financial Position as at 31 December 2019
2019 2018
Rs. in million
Biological assets [1300 +100 – 90] and [600 + 700] 1,310 1,300

Zoha Limited
Extracts of Statement of Comprehensive Income for the year ended 31 December 2019
2019 2018
Rs. in million
Fair value gain on biological assets 100 700
Loss on biological assets due to decrease in harvest (90) -
10 700

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 CAF 7 – IAS 41

ANSWER 06
Biological assets should be measured at each reporting date at fair value less estimated
selling costs unless fair value cannot be measured reliably. The Standard encourages
companies to separate the change in fair value less estimated selling costs between those
changes due to physical reasons and those due to price.
Page | 12 Fair value of cattle excluding Lahore region: Rs. 000 Rs. 000
Fair value at January 1, 2018
Cows (210,000 – 60,000) × 40 6,000
Heifers (30,000 – 20,000) × 30 300
Purchase 75,000 heifers × 30 2,250
8,550
Increase due to price change
150,000 × (45 – 40) 750
10,000 × (32 – 30) 20
75,000 × (32 – 30) 150
920
Increase due to physical change
150,000 × (50 – 45) 750
10,000 × (45 – 32) 130
75,000 × (36 – 32) 300
1,180 10,650
Fair value less estimated POS costs at October 31, 20X4
150,000 × 50 7,500
10,000 × 45 450
75,000 × 36 2,700 10,650

Lahore region—fair value of cattle:

This region has an inventory of cattle of 60,000 cows and 20,000 heifers. Fair value is
difficult to ascertain because of the region’s problems. However, according to IAS 41, if fair
value was used on initial recognition, then it should be continued to be used. The cattle in
this region would have been fair valued at January 1, 2018, under the Standard. Therefore,
the cattle must be valued at fair value less estimated selling costs as at December 31, 2018.

Although Rs.3 million has been offered for these animals, this may be an onerous contract
as rival companies are likely to wish to take advantage of the problems in this region. The
future discounted income is again an inappropriate value as the cattle are healthy and could
be moved to another region and sold.

The cattle in this region would therefore be valued at

Rs.000
60,000 cows × 50 3,000
20,000 heifers × 45 900
3,900

Latest update: May 2020

 CAF 7 – IAS 41

OBJECTIVE BASED QUESTIONS

01. To which of the following items does IAS 41 Agriculture apply?
(i) A change in fair value of a herd of animals relating to the unit price of the animals.
(ii) Logs held in a wood yard.
(iii) Farm land which is used for growing vegetables.
(iv) The cost of developing a new type of crop seed which is resistant to tropical diseases.
(a) All four Page | 13
(b) (i) only
(c) (i) and (ii) only
(d) (ii) and (iii) only

02. IAS 41 should be applied to account for the following when they relate to agricultural activity:
(i) Biological assets.
(ii) Agricultural produce at the point of harvest.
(iii) Certain government grants.
(iv) Land related to agricultural activity.
(v) Intangible assets related to agricultural activity.
(a) (i)
(b) (i) & (ii)
(c) (i), (ii) & (iii)
(d) (i), (ii) , (iii) & (iv)

03. IAS 41 is applied to agricultural produce:

(a) Before the harvest
(b) Only at the point of harvest
(c) After the harvest
(d) Before, during and after the harvest

04. Agricultural activity is the management of biological transformation of biological assets:

(i) for sale
(ii) into agricultural produce.
(iii) into additional biological assets.
(a) (i)
(b) (i) & (ii)
(c) (i), (ii) & (iii)
(d) (ii) & (iii)

05. Identify whether the following items would be accounted for under IAS 41 Agriculture or not.
 Dairy cattle
 Milk
 Cheese
(a) All three
(b) Dairy cattle and Milk only
(c) Milk and Cheese only
(d) Dairy cattle and Cheese only

06. Agricultural activity covers a diverse range of activities; for example:

(i) Raising livestock
(ii) Forestry
(iii) Annual or perennial cropping
(iv) Cultivating orchards and plantations
(v) Food processing
(a) (i)
(b) (i), (ii) & (v)
(c) (i), (ii), (iii) & (v)
(d) (i), (ii), (iii) & (iv)

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 CAF 7 – IAS 41

07. An active market is a market where all the following conditions exist:
(i) The items traded within the market are homogeneous
(ii) Willing buyers, and sellers, can normally be found at any time
(iii) Prices are available to the public
(iv) The market trades every day
(a) (i)
(b) (i), (ii)
Page | 14 (c) (i), (ii), & (iii)
(d) (i), (ii), (iii) & (iv)
08. An undertaking should record a biological asset, or agricultural produce, only when:
(i) The undertaking controls the asset, as a result of past events.
(ii) Future benefits, associated with the asset, will flow to the undertaking.
(iii) The fair value, or cost, of the asset can be measured reliably.
(a) (i)
(b) (i), (ii)
(c) (i), (ii), & (iii)
(d) None of the above

09. Point-of-sale costs include:

(i) Commissions to brokers and dealers.
(ii) Levies by regulatory agencies.
(iii) Levies by commodity exchanges.
(iv) Transfer taxes and duties.
(v) Transport, and other costs, necessary to transport assets to a market.
(a) (i)
(b) (i), (ii) & (v)
(c) (i), (ii), (iii) & (v)
(d) (i), (ii), (iii) & (iv)
10. Pluto Limited owned a one-year old herd of cattle on 1 January, recognised in the financial
statements at Rs. 140 million. At 31 December, the fair value of a two-year-old herd of cattle is
Rs. 170 million. Costs to sell are still estimated to be Rs. 5 million for the whole herd.
What is the correct accounting treatment for the cattle at 31 December according to IAS 41
Agriculture?
(a) Revalue to Rs. 165 million, taking gain of Rs. 25 million to other comprehensive income.
(b) Revalue to Rs. 165 million, taking gain of Rs. 25 million to the statement of profit or loss.
(c) Revalue to Rs. 170 million, taking gain of Rs. 30 million to other comprehensive income.
(d) Revalue to Rs. 170 million, taking gain of Rs. 30 million to the statement of profit or loss.

11. The information sources may suggest different conclusions as to the fair value of a biological
asset, or agricultural produce. Use:
(a) The most reliable estimate
(b) The lowest figure
(c) The average figure
(d) None of above
12. A grant related to a biological asset measured at cost because ‘fair value less estimated point-
of-sale costs’ could not be measured reliably, should be recorded as income:
(a) In accordance with IAS 41
(b) In accordance with IAS 20
(c) When the grant becomes receivable
(d) When the conditions of grant are met

13. A conditional grant related to a biological asset measured at its ‘fair value less estimated point-
of-sale costs’ should be recorded as income:
(a) Only when cash is received
(b) Only when the grant becomes receivable
(c) Only when the conditions are met
(d) Only when it is expected that grant may be received.

Latest update: March 2020

 CAF 7 – IAS 41

14. A gain (or loss) may arise on initial recognition of a biological asset:
(i) Because estimated point-of-sale costs are deducted in determining ‘fair value less
estimated point-of-sale costs’ of a biological asset
(ii) When a calf is born
(iii) As a result of harvesting
(a) (i)
(b) (i) & (ii)
(c) (i), (ii) & (iii) Page | 15
(d) None of these

15. An unconditional grant related to a biological asset measured at its ‘fair value less estimated
point-of-sale costs’ should be recorded as income:
(a) Only when cash is received
(b) Only when the grant becomes receivable
(c) Only when the goods are sold
(d) Only when it is expected that grant may be received.

16. Wool Limited (WL) started its business on 1 April 2015.

On 1 April 2015, WL purchased a flock of sheep for Rs. 100 million. At 31 March 2016, the flock
was valued at Rs. 120 million. Every time animals are sold there is a 5% commission fee
payable to the district municipal corporation.No further sheep was purchased or sold during the
year. During the year, the wool sheared by WL had “fair value less point of sale costs” of Rs. 8
million.

At which amount the flock of sheep should be presented in financial statement of WL as at 31

March 2016?

Rs. ___________

17. Wool Limited (WL) started its business on 1 April 2015.

On 1 April 2015, WL purchased a flock of sheep for Rs. 100 million. At 31 March 2016, the flock
was valued at Rs. 120 million. Every time animals are sold there is a 5% commission fee
payable to the district municipal corporation. No further sheep was purchased or sold during the
year. During the year, the wool sheared by WL had “fair value less point of sale costs” of Rs. 8
million.
Calculate the total income of WL in respect of its agriculture activity for the year ended 31 March
2016.

Rs. ___________

18. Maria Limited (ML) bought oil palm garden for Rs. 150 million (includes Rs. 120 million for land)
on 1 January 2019. The garden is expected to give agriculture produce for next three years
before re-plantation process.

On 31 December 2019, the year end, the fair value of garden is Rs. 22 million (excluding land).
Estimated point-of-sale costs are Rs. 2 million. Land has fair value of Rs. 130 million on 31
December 2019.ML uses cost model for items under scope of IAS 16 and ‘fair value less point
of sale cost for items under scope of IAS 41

What is the total amount of non-current assets to be presented in statement of financial position
of ML as at 31 December 2019?

Rs. ___________

© kashifadeel.com
 CAF 7 – IAS 41

19. Cow Limited (CL) owned cattle recorded in the financial statements at Rs. 10.5 million on 1
January 2014.

At 31 December 2014 the cattle have a fair value of Rs. 13 million. If CL sold the cattle,
commission of 2% would be payable.

What is the gain to be recognised in profit or loss for the period ended at 31 December 2014
Page | 16 according to IAS 41 Agriculture?

Rs. ___________

20. A herd of fifty 3-year old animals was held on 1 January 2013. On 1 July 2013 ten 3.5-year-old
animal were purchased for Rs. 40,000.

The fair values less estimated point of sale costs were:

 3-year-old animal at 1 January 2013 Rs. 32,000
 3.5-year-old animal at 1 July 2013 Rs. 40,000
 4-year-old animal at 31 December 2013 Rs. 43,000

Calculate the amount that will be taken to the statement of profit or loss for the year ended 31
December 2013.

Rs. ___________

21. IAS 41 is applied to agricultural produce: [A19]

(a) before the harvest
(b) at the point of harvest
(c) after the harvest
(d) before, during and after the harvest (01)

Latest update: March 2020

 CAF 7 – IAS 41

OBJECTIVE BASED ANSWERS

01. (b) The logs will be classed as inventory. The land will be classed as
property, plant and equipment. The development costs will be treated as
an intangible asset.

02. (c) Land is not biological asset and IAS 38 applies to intangible assets Page | 17
relating to agricultural activity, for example, license for a dairy business.

03. (b) IAS 41 applies to agriculture produce at the time of harvest and not
afterwards.

04. (c) All three are part of agriculture activity.

05. (b) The cheese will be a product which is the result of processing after
harvest, so will be outside the scope of IAS 41 Agriculture.

06. (d) Food processing is outside scope of agriculture activity.

07. (c) The daily market trading is not necessary criteria.

08. (c) All three are required recognition criteria.

09. (d) Cost of transport to the market is not part of point of sale costs.

10. (b) Agriculture should be revalued to fair value less costs to sell, with the gain
or loss being shown in the statement of profit or loss.

11. (a) The most reliable estimate should be used.

12. (b) IAS 20 applies in this case.

13. (c) Conditional grant is recognised, only when conditions are met, under IAS
41.

14. (c) In all three cases, a gain or loss is recognised in profit or loss.

15. (b) Unconditional grant is recognised when it becomes receivable under IAS
41

16. Rs. 114 million Biological assets = 120 x 95% = Rs. 114 million

17. Rs. 22 million Gain on biological assets = (120 x 95%) – 100 = Rs. 14 million
Agriculture produce at point of harvest = Rs. 8 million
Total Rs. 22 million

18. Rs. 140 million Land Rs. 120 million (cost)

Oil palms Rs. 30 million – Rs. 10 million depreciation = Rs. 20 million
Total Rs. 140 million
Oil palms are bearer plants and therefore, IAS 16 is applicable.

19. Rs. 2.24 million (Rs. 13 million x 98%) – 10.5 = Rs. 2.24 million

© kashifadeel.com
 CAF 7 – IAS 41

20. Rs. 580,000

Rs.
As at 1 January 50 animals x Rs. 32,000 1,600,000
Purchased 10 animal x Rs. 40,000 400,000
2,000,000
Gain (balancing figure) 580,000
As at 31 December 60 animals x Rs. 43,000 2,580,000
Page | 18

21. (b) At the point of harvest.

Latest update: March 2020