PowerPoint Presentation

Agriculture (ToA.204)

L. R. CabarlesProfessional Review and Training CenterPRTC1This chapter assumes only an introductory level of understanding regarding auditing and reporting.

Additional help in your text includes:Appendix B (p. 36) with the common acronyms/abbreviations used in Ch. 1Appendix C (p.37) with a much more detailed chronology than required.Relevant Standard PAS 41 Agriculture

PFRS 13 Fair Value Measurement

PRTC2Objectives (text, p. 2) continued on next slide.Scope of PAS 41Applies to:

Biological assets; and

Agricultural produce at the point of harvest.

When they relate to agricultural activityPRTCObjectives (text, p. 2) continued on next slide.Key DefinitionsBiological asset is a living animal or plant.

Agricultural produce is the harvested product of the entitys biological assets.

Harvest is the detachment of produce from a biological asset or the cessation of a biological assets life processes.PRTC4Objectives (text, p. 2) continued on next slide.Key DefinitionsAgricultural activity is the management by an entity of the biological transformation and harvest of biological assets for sale, or for conversion into agricultural produce, or into additional biological assets.

Biological transformation comprises the processes of growth, degeneration, production, and procreation that cause qualitative or quantitative changes in a biological asset.PRTC5Objectives (text, p. 2) continued on next slide.Examples of Agricultural ActivityRaising livestockForestryAnnual or perennial croppingCultivating orchards and plantationsFloricultureAquaculture (including fish farming)PRTC6Objectives (text, p. 2) continued on next slide.Examples of NOT anAgricultural ActivityOcean fishing

DeforestationPRTC7Objectives (text, p. 2) continued on next slide.ExamplesBiological assetsAgricultural produceProcessed produceSheepWoolYarn, carpetTrees in a plantation forestFelled treesLumberLogsPlantsCottonThread, clothingHarvested caneSugarDairy cattleMilkCheesePigsCarcassSausages, cured hamsBushesLeafTea, cured tobaccoVinesGrapesWineFruit treesPicked fruitProcessed fruitPRTC8Objectives (text, p. 2) continued on next slide.RecognitionAn entity should recognize a biological asset or agricultural produce when, and only when:the entity controls the asset as a result of past events;it is probable that future economic benefits will flow to the entity; andthe fair value or cost of the asset can be measured reliably.PRTC9Objectives (text, p. 2) continued on next slide.Measurement Biological AssetsOn initial recognition and at subsequent reporting dates at fair value less costs to sell, unless fair value cannot be reliably measured.

A gain or loss on initial recognition at fair value, and changes in fair value during a period, are reported in profit or loss. PRTC10Objectives (text, p. 2) continued on next slide.Measurement Agricultural ProduceAt fair value less costs to sell at the point of harvest. Because harvested produce is a marketable commodity, there is no 'measurement reliability' exception for produce.

A gain on initial recognition at fair value should be included in profit or loss for the period in which it arises. PRTC11Objectives (text, p. 2) continued on next slide.Measurement DefinitionsFair value is the the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.

PRTC12Objectives (text, p. 2) continued on next slide.Measurement DefinitionsCosts to sell are the incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxes.PRTC13Objectives (text, p. 2) continued on next slide.Fair value is separately identifiable

Measure biological assets at fair value less cost-to-sell

Fair value is not separately identifiable

Deduct fair value of other assets to arrive at the fair value of biological assets

Biological assets physically attached to LandPRTCHow to Determine Fair Value?The fair value of an asset is based on its present location and condition.

The fair value of a biological asset is based on current quoted market prices and is not adjusted to reflect the actual price in a binding sale contract that provides for delivery at a future date.PRTC15Objectives (text, p. 2) continued on next slide.Analysis of increase in valueDue to price changes? (same age; different dates)

Due to physical changes? (same date; different ages)PRTC16Objectives (text, p. 2) continued on next slide.STQ Answers C B C C D

PRTC17Objectives (text, p. 2) continued on next slide.STQ Answers B B C C D

PRTC18Objectives (text, p. 2) continued on next slide.STQ Answers B D B B A

PRTC19Objectives (text, p. 2) continued on next slide. end of ToA.204 PRTC