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INVESTMENT PROPERTY and BIOLOGICAL ASSET

Investment property is land or buildings held to earn rentals or for capital appreciation rather than for production or administrative purposes. Examples include land for long-term capital gains, vacant buildings held for future leases, or property under development to lease. Biological assets are living animals or plants, with agricultural produce as the harvested output. Biological assets are initially measured at fair value less estimated point-of-sale costs, with changes in fair value due to price changes or physical changes recorded over time. A reconciliation is done at year-end to calculate the carrying value of biological assets.

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61 views1 page

INVESTMENT PROPERTY and BIOLOGICAL ASSET

Investment property is land or buildings held to earn rentals or for capital appreciation rather than for production or administrative purposes. Examples include land for long-term capital gains, vacant buildings held for future leases, or property under development to lease. Biological assets are living animals or plants, with agricultural produce as the harvested output. Biological assets are initially measured at fair value less estimated point-of-sale costs, with changes in fair value due to price changes or physical changes recorded over time. A reconciliation is done at year-end to calculate the carrying value of biological assets.

Uploaded by

Bryan Reyes
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Practical Accounting 1 1

Investment Property and Biological Asset

INVESTMENT PROPERTY (IAS 40)

- Is a land or building, or both, held by the owner or by the lessee under a finance lease to earn rental or for
capital appreciation, or both, rather than for use in the production or supply of goods or services or for
administrative purposes in the ordinary course of business.
- Examples of IP:
 Land held for long-term capital appreciation rather for sale in the ordinary course of business
 Land held for currently undetermined future use
 A building owned by an entity (or held by an entity under finance lease) and leased out under one or
more operating leases
 A building that is vacant but is held to be leased out under one or more operating lease
 A property that is being developed or constructed for future use

BIOLOGICAL ASSETS (IAS 41)

- Is a living plant or animal.


- Agricultural produce is the harvested product of the entity’s biological assets
- Initially recognized upon purchase or upon birth of an animal
- Initially measured at fair value less estimated point of sale cost

Pro forma entries:


When animal is born
Biological Asset xxx
Income xxx
If purchased and purchase price exceeds its fair value less estimated point of sale cost
Biological Asset (at FV less POS) xxx
Loss on Initial Recognition of Biological Asset xxx
Cash (purchase price) xxx
Changes in the Fair Value of Biological Asset

a. Due to Price Change- same age, different dates

b. Due to Physical Change- same date, different age

RECONCILIATION (computation of carrying value of Biological Asset at year end)

Balance, Beginning of the year xxx


Purchases xxx
Change in FV less POS Cost
Due to Price Change xxx
Due to Physical Change xxx xxx
Sale of Biological Asset (xxx)
Balance, end of the year xxx

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