PAS 41 - BIOLOGICAL ASSETS Gain or Loss

A gain or loss arising on initial recognition of a biological asset at fair

PAS 41 is applied to agricultural produce at the point of harvest. value less costs to sell and any subsequent changes in fair value
Thereafter PAS 2 on inventories shall be applied. costs to sell shall be included in profit and loss.

Biological Assets – living plants and animals. A gain or loss arising from initial recognition of agricultural produce
Agricultural Produce – harvested product of an entity’s biological at fair value less costs to sell shall also be included in profit and loss.
assets
Agricultural Land is not deemed biological asset.
Agricultural Activity – management by an entity of the biological
transformation and harvest of biological assets for sale or Biological Assets are often physically attached to land. There may be
conversion into agricultural produce or into additional biological no separate market for biological assets that are attached to the
assets. land but an active market may exist foe the combined assets, that is,
for the biological assets and land as a package.
Features of Agricultural Activity:
1. Capability to change Government grant
2. Management of change An unconditional government grant to a biological asset that has
3. Measurement of change been measured at fair value less cost to sell shall be recognized as
income when the grant becomes receivable.
Biological Transformation – comprises the processes of growth,
degeneration, production and procreation that cause qualitative or If government grant related to a biological asset measured at fair
quantitative changes in biological assets. value less cost to sell is conditional, the grant shall be recognized as
income only when the conditions attaching to grant are met.
Recognition:
An entity shall recognize a biological asset or agricultural produce PROBLEMS:
when:
a. The entity controls the asset as a result of past event 1. Coron Company reclassified certain assets as biological
b. It is probable that future economic benefits associated assets. The total value of the forest tress is P6,000 which
with the asset will flow to the entity comprised the following:
c. The fair value of the asset can be measured reliably Freestanding trees 5,100
Land under trees 600
Measurement: Roads in forest 300
A biological asset shall be measured on initial recognition and the
end of each reporting period at fair value less costs to sell. What total amount of the forest trees should be classified
as biological assets?
Agricultural produce shall be measured at fair value less costs to sell
at the point of harvest. 2. Palawan Company has a herd of 100 2-year old animals on
January 1, 2019. Ten animals aged 2.5 years were
Costs to sell – are the incremental costs directly attributable to the purchased on July 1, 2019 for P10,800 each and ten
disposal of an asset such as commissions to brokers and dealers, animals were born on July 1, 2019. No animals were sold
levies by regulatory agencies and commodity changes, and transfer or disposed of during the year. The fair values less cost of
taxes and duties. It exclude transports cost, finance costs and disposal per unit were:
income taxes.
2 - year old animal on January 1 10,000
Fair Value of Biological Asset 2.5 – year old animal on July 1 10,800
There is a presumption that fair value can be measured reliably for a New born animal on July 1 7,000
biological asset. However, this presumption can be rebutted only on 2 – year old animal on Dec. 31 10,500
initial recognition for a biological asset for which market determined 2.5 – year old animal on Dec. 31 11, 200
prices are not available or estimates of fair value are determined to Newborn animal on December 31 7,200
be clearly unreliable. In such case, the biological asset shall be 3 – year old animal on December 31 12,000
measured at cost less accumulated depreciation and any 0.50 year old animal on December 31 8,000
accumulated impairment loss.
a. What is the carrying amount of the biological assets
However, once the fair value of such a biological asset becomes on December 31, 2019?
clearly measurable, the entity shall measure the biological asset at
fair value less costs to sell. b. What is the total gain from biological assets for 2019?

Fair Value of Agricultural Produce c. What is the gain from biological asset attributable to
In all cases, an entity shall measure agricultural produce at point of price change?
harvest at fair value less cost to sell
d. What is the gain from biological asset attributable to
PAS 41 reflects the view that fair value of agricultural produce at the physical change?
point of harvest can always be measured reliably. The fair value
measurement of agricultural produce stops at the point of harvest.
After that date, PAS 2 shall apply.
Summary – Not For Profit Organizations (NPO) Other Notes:

NPO - is a non-stock corporation that is organized for the benefit of  Revenues and gains from own principal and auxiliary
the public as a whole rather than for the benefit of an individual activities or from donors
proprietor or a group of partners of stockholders  Contributions – contributions of cash and other assets are
recognized when received and credited to contributions
Financial Statements required for Private Not for Profit revenue (restricted or unrestricted). Contributed Services
Organizations: and Facilities are recognized both as expenses and
a. Statement of Financial Position contributions revenues, net of expenses.
b. Statement of Activities  Pledges – unconditional pledges are recognized as
c. Statement of Cash Flows receivables and contributions revenue (restricted or
d. Specific for Voluntary Health and Welfare Organizations unrestricted). Appropriate provisions for doubtful pledges
Statement of Functional expenses are also to be set up
 Expenses and losses – all expenses of the NPO are
1. Statement of Financial Position – shows assets and liabilities recognized in the unrestricted fund. (Program and
similar to commercial accounting. Net Assets are classified Supporting)
into:
Problems:
 Unrestricted – no donor imposed restrictions
1. GG Hospital had the following cash receipts and
 Temporarily restricted – with donor imposed stipulations disbursements for the year ended December 31, 2019:
(expiration of time and fulfilment of use restrictions Collections from patients 2,500
Contributions for an establishment
 Permanently restricted – with donor imposed restrictions of term endowment 500
that do not expire nor can be removed by NPO activity.
Tuition from nursing school 1,000
2. Statement of Activities – show revenues, expenses, gains, Interest received from investment in
and losses as well as reclassifications among the different permanent endowment 175
types of net assets. The change in net assets for each type is Dividend received from investment in
required. Expenses are required (reported) only in permanent endowment 200
unrestricted net assets Payment of program expenses 750

3. Statement of Cash Flows – similar to the cash flows prepared The interest received from permanent endowment is restricted
in commercial accounting by the donor for acquisition of medical equipment.

4. Specific funds by not for profit organization How much is the net cash provided by operating activities?
a. Unrestricted Fund – include all the resources that are Financing activities?
available for use by authority of Board of Directors (even
though designated for specific purposes) and are not 2. PEP’s Hospital, a NPO hospital affiliated with a religious group,
restricted by donors.
reported the following information for the year ended
b. Restricted Fund – accounts for assets available for current
use but are not derived from the operations of the NPO’s. December 31, 2019:
These assets are transferred to unrestricted funds at the Gross Patient service rendered 12,000
time the designated expenditure is made. Bad debts expense 2,500
c. Endowment Fund Contractual adjustment with third party payors 1,000
 Permanent – principal is to be maintained indefinitely Charity Care 750
in revenue providing investments Courtesy allowances to hospital employees 450
 Term – principal may be expended after passage of a
period of time
 Quasi-endowment – established by BOD under its a. Net patient service revenue for the hospital for the year
control ended December 31, 2019?

d. Agency Fund – used to account for assets held by NPO as a b. Net Income for the year ended 2019?
Custodian

e. Others, like annuity funds, loss funds (for colleges) and

plant funds