Inventory & Biological Asset

Inventories should be measured at the lower of cost and net realisable value

• False

• True

What does NOT form part of cost of inventory?

• Costs to bring into current location & condition

• Conversion costs

• Selling costs

• Purchase price

The net realisable value of an item is essentially its net selling proceeds after all costs have been deducted

• True

• False

IAS 41 deals with accounting for the period as plants / animals grow.. until Harvest

Do you think it also deals with land on which these plants / animals grow?

• No

• Yes

So we buy some plants (or an animal) - what do you think the standard calls these?

• Biological assets

• Aniplants

if we buy some biological assets - at what value shall we put them on the SFP?

• Zero

• Fair value less costs to sell

So we have had these biological assets for a year - and they still haven't harvested - what do you think we should do at the year end?

(Don't forget animals and plants GROW)

• Revalue them

• Leave them at cost

when we revalue biological assets each year to FV- CTS where does the other side of the entry go?

• OCI

• Income statement

So any revaluation gains go to I/S - therefore what about any expenses we pay for them during their life (not the initial cost) where do you think they go?

• Added to the cost of the biological asset

• Income statement

So we know that we initially recognise biological assets and revalue them using FV-CTS (difference and any other expenses to I/S)

What do you think happens if we can't work out the FV (very rare)?

• Make a FV best guess

• Use cost - depreciation (and impairment)