The concept of gain or loss in biological assets is based on fair value measurement.

When a
biological asset is first recognized, or when its fair value changes over time, the difference is
recorded as a gain or loss in profit or loss. The formula used to determine this is:

Gain or Loss = Fair Value Less Cost of Disposal (at the end of the period) – Fair Value
Less Cost of Disposal (at the beginning of the period)

If a biological asset is newly acquired or born, its fair value is determined at that moment, and
the cost of disposal is deducted. If this results in a positive value, it is recorded as a gain. If the
cost of disposal reduces the fair value significantly, it results in a loss. Similarly, agricultural
produce, such as harvested crops, is recognized at fair value at the time of harvesting, with any
gain or loss included in profit or loss.

Agricultural land itself is not considered a biological asset and is measured separately under
different accounting standards like PAS 16 (for property, plant, and equipment) or PAS 40 (for
investment property). However, when biological assets are attached to land, such as trees in a
plantation forest, their value may not always have a separate market. In such cases, the total
value of both the land and the biological assets together is determined, and the fair value of the
land is deducted to arrive at the fair value of the biological asset alone.​
​
A biological asset is measured at fair value less cost of disposal, which means its market
price minus any costs required to sell it. This is based on the assumption that fair value can be
reliably determined. However, if there is no reliable market price when the asset is first
recognized, it is measured at cost minus depreciation and impairment until its fair value can
be determined.

Agricultural produce, such as harvested crops, is always measured at fair value less cost of
disposal at the point of harvest because this value is considered reliable. Once harvested, it
is no longer measured at fair value but instead treated as inventory and recorded at either its
cost or net realizable value, whichever is lower. The amount determined at the point of harvest
becomes its cost for inventory purposes, and any gain from this measurement is recorded as
income.

For agricultural produce that is still growing on bearer plants (such as fruits on trees), it remains
classified as a biological asset under IAS 41 and is measured at fair value less cost of disposal
at the end of each reporting period before harvest.

What are Bearer Plants?

A bearer plant is a living plant that is used exclusively for producing agricultural goods over
multiple periods. Unlike crops grown for immediate harvest and sale (such as wheat or
vegetables), bearer plants are more like long-term assets that continue to yield produce for
years. This is why they are treated as property, plant, and equipment (PPE) under accounting
standards, similar to machines used in manufacturing.
For a plant to qualify as a bearer plant, it must meet three conditions:

1.​ Used in agricultural production – The plant is cultivated to grow produce rather than
being harvested itself.​

2.​ Expected to bear produce for more than one period – It is not grown for a single
season but for multiple harvests over time.​

3.​ Not primarily grown for sale – The plant itself is not meant to be sold as an agricultural
product, except for incidental scrap value at the end of its life.​

Accounting Treatment of Bearer Plants

Since bearer plants are classified as PPE, they are subject to the same accounting treatment as
buildings or machinery:

●​ They are initially recorded at cost, which includes planting, fertilization, and maintenance
costs until they start producing.​

●​ They are depreciated over their useful life because they do not last forever.​

●​ At the end of their productive life, they are usually scrapped. Any small income from
selling them as scrap does not change their classification as bearer plants.​

Examples of Bearer Plants

1.​ Fruit-bearing trees – Apple trees, mango trees, and coconut trees are bearer plants
because they continue producing fruit over many years. The fruits they produce are
agricultural produce until harvested.​

○​ For instance, in an oil palm plantation, the coconut tree is the bearer plant,
while the coconuts are the agricultural produce.​

○​ Immature coconuts can be sold for drinking (as buko juice), while mature
coconuts can be processed into oil, charcoal, and dried coconut flesh (copra).​

2.​ Grapevines in a vineyard – The grapevines themselves are bearer plants, while the
grapes they produce are agricultural produce. After harvest, the grapes may be sold as
fresh fruit or processed into wine.​

Key Difference Between Bearer Plants and Agricultural Produce

 ●​ Bearer plants are long-term assets (they are used repeatedly to produce goods and
are not meant to be sold).​

●​ Agricultural produce is short-term inventory (it is harvested and sold in its natural
state or processed into other products).

Plants That Are Not Considered Bearer Plants

●​ Trees grown to be harvested and sold as logs or lumber are not bearer plants.
These trees are cultivated to be cut down and sold, not to continuously produce
agricultural goods over multiple periods.​

●​ Annual crops like corn and rice are also not bearer plants because they do not bear
produce over multiple periods. They grow, are harvested, and do not continue
producing after that.​

Dual-Use Plants

Some plants serve two purposes at the same time, making their classification more complex. A
dual-use plant is one that both:

1.​ Produces agricultural goods (such as fruit, latex, or sap).​

2.​ It itself is sold as a product (either as a living plant or for its material, like wood or
lumber).​

For example, rubber trees are often used to produce rubber milk (a form of latex) during their
productive life. However, at the end of their life, they may also be sold as timber.

●​ When a rubber tree is grown for both latex production and eventual sale as lumber,
it is classified as a biological asset because it has dual use.​

●​ When a rubber tree is grown only for latex production and then discarded at the end
of its life, it is classified as a bearer plant.​

Why Judgment is Required

Determining whether a plant is a bearer plant or a biological asset is important because it affects
how the plant is accounted for in financial statements. If the plant itself is regularly sold (not just
its produce), it should be classified as a biological asset. However, if sales of the plant itself
are only incidental (like scrap sales at the end of its life), it can still be classified as a bearer
plant.​
​
1. Measurement of Immature Bearer Plants

●​ Immature bearer plants are those that have not yet reached a level of maturity where
they can start producing agricultural products (e.g., grapevines or oil palms that are still
growing).​

●​ They are similar to items of property, plant, and equipment being constructed before the
intended use.​

●​ Cost Accumulation: During the immature stage, costs are accumulated similarly to a
self-constructed item of property, plant, and equipment. This includes direct costs such
as labor, materials, and overheads directly associated with growing the plant.​

●​ Ceasing Cost Accumulation: The accumulation of costs stops when the bearer plants
are in the location and condition necessary for their intended use (i.e., when the plants
reach maturity and can produce agricultural products).​

●​ Tracking Costs: It's important for entities to track and capture the costs incurred for
bearer plants during their immature stage so that these costs can be correctly
capitalized.​

2. Measurement of Mature Bearer Plants

●​ Maturity of Bearer Plants: There is no clear guidance on when a bearer plant is

considered mature. The maturity stage may differ depending on the type of plant. For
instance, a grapevine could take years to produce fruit suitable for wine production.​

●​ Judgment Required: Determining when a bearer plant reaches maturity requires

judgment, and entities need an accounting policy to establish this point. Factors that
might influence this judgment could include the plant's ability to produce its intended
agricultural product in sufficient quantity and quality.​
​
For example, a grapevine might be considered mature after several years of growth
when it starts yielding fruit of the desired quality and quantity for wine production.​

●​ Measurement Models for Mature Bearer Plants:​

○​ Cost Model: Under the cost model, mature bearer plants are measured at cost
less accumulated depreciation and impairment losses. Depreciation is based on
the plant’s productive life.​
 ○​ Revaluation Model: Under the revaluation model, mature bearer plants are
measured at fair value at the revaluation date, with any increase or decrease in
fair value recognized in other comprehensive income.​

●​ Depreciation: Mature bearer plants are depreciated over their productive useful life.
This life is determined based on the number of years the plant can bear agricultural
produce. The depreciation should be systematic and reflect the pattern in which the
plant’s benefits are consumed over its useful life.​

Summary

●​ Immature bearer plants: Measured at accumulated cost, and costs are tracked during
their growth stage until they reach maturity.​

●​ Mature bearer plants: Measured either under the cost model or revaluation model,
with depreciation over the plant's productive life.

1. Bearer Animals

●​ Definition: Similar to bearer plants, bearer animals are those held for agricultural
purposes, primarily to produce agricultural products, such as milk, eggs, or
offspring. These animals are not intended for sale as biological assets
themselves.​

●​ IASB's Decision: The IASB (International Accounting Standards Board) decided

that bearer animals should continue to be accounted for as biological assets
under IAS 41. This decision is based on the idea that measuring bearer animals as
property, plant, and equipment under IAS 16 would be more complex.​

○​ Biological Assets: Bearer animals are treated as biological assets because

they are living organisms that are actively involved in agricultural
production. The ongoing transformation or production (e.g., breeding, milk
production) that they contribute to is considered part of the biological
process.​

○​ Valuation: Bearer animals are typically measured at fair value less costs to
sell (unless fair value cannot be reliably determined, in which case they
may be carried at cost less any accumulated depreciation and impairment).​

2. Animal-Related Recreational Activities (Game Parks, Zoos)

 ●​ Definition: Activities that involve animals in recreational contexts, such as those
found in game parks and zoos, are not considered agricultural activities. This is
because the primary activity is not the management of the transformation of
biological assets (i.e., the production of agricultural goods), but rather the
management of the animals for recreational purposes.​

●​ Reason for Classification: In these cases, the natural breeding of animals is

incidental to the main activity of providing a recreational experience. Therefore,
the focus is on controlling the number of animals rather than actively managing
the agricultural production process.​

●​ Accounting Treatment: Animals related to recreational activities should be

accounted for as property, plant, and equipment under IAS 16, not as biological
assets under IAS 41. This reflects the fact that the animals are not actively used to
produce agricultural goods, but instead serve as part of a recreational or
entertainment operation.​

Summary of Key Points:

●​ Bearer animals: Treated as biological assets under IAS 41 because they are held
for the production of agricultural goods. They are not measured as property, plant,
and equipment due to the complexity of such an approach.​

●​ Animal-related recreational activities: Animals in contexts such as zoos and game

parks, where they are not managed for agricultural production but for recreation,
are accounted for as property, plant, and equipment under IAS 16.