Question

Explain the difference between biological asset ‘bearer plants’.

Answer 1

Biological assets are the principal assets of agricultural activities, and they are held for their transformative potential. This results in two major types of outcomes; the first may involve asset changes – as through growth or quality improvement, degeneration or procreation. The second involves the creation of separable products initially qualifying as agricultural produce.

A biological asset shall be measured on initial recognition and at the end of each reporting period at its fair value less cost to sell. Agricultural produce harvested from an entity’s biological assets shall be measured at its fair value less cost to sell the point of harvest.

A bearer plant is defined as a living plant that : (a) is used in the production or supply of agricultural produce; (b) is expected to bear produce for more than one period; and (c) has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.

When bearer plants are no longer used to bear produce they might be cut down and sold as scrap, for example, for use as firewood. Such incidental scrap would not prevent the plant from satisfying the definition of a bearer plant.

The measurement requirements for bearer plants should be as follows :before maturity, bearer plants must be measured at their accumulated cost, similar to the accounting treatment for a self-constructed item of plant and equipment before it is available for use; and after the bearer plant is mature, entities have a policy choice to measure the bearer plants using either the cost model or the revaluation model.

Bearer plants includes the ability to choose between the cost model and the Revaluation model for the subsequent measurement. Agricultural produce growing on bearer plants will remain within the scope of the IAS 41 Agriculture, i.e as a biological asset.