Deck 41: Agriculture

Question 1

According to IAS 41, once the fair value of a biological asset becomes determinable, the asset:

A) Must be recorded at cost less any accumulated depreciation and accumulated impairment costs.
B) Must be recorded at fair value less finance costs.
C) May be recorded at either cost or fair value.
D) None of the above.

Answer 1

None of the above.

Question 2

Biological assets should be measured at fair value less the following costs except:

A) Transfer Taxes
B) Duties
C) Income Taxes
D) Levies

Answer 2

Income Taxes

Question 3

Which of the following is the order of the hierarchy as prescribed in IAS 41 for approximating fair value of an agricultural asset?

A) Active market price, sector benchmarks, recent transaction price, present value of future cash flows, market price for similar assets
B) Active market price, market price for similar assets, recent transaction price, sector benchmarks, present value of future cash flows
C) Active market price, recent transaction price, market prices for similar assets, sector benchmarks, present value of future cash flows
D) Active market price, present value of future cash flows, market prices for similar assets, sector benchmarks, recent transaction price

Answer 3

Active market price, recent transaction price, market prices for similar assets, sector benchmarks, present value of future cash flows

Question 4

Which of the following features is not a determining factors for an activity to be classified as an agricultural activity?

A) Capability of change
B) Management of change
C) Measurement of change
D) Expectation of change

Question 5

What is the correct order in the hierarchy specified by IAS 41 to be used by an entity to approximate the fair value of an agricultural asset?
1) Sector benchmarks
2) Price for the asset in an active market
3) Present value of the future cash flows the asset is expected to generate
4) Market prices for similar assets, with adjustments made for the differences
5) Recent transaction price

A) 3, 4, 1, 2, 5
B) 2, 5, 4, 1, 3
C) 1, 3, 4, 5, 2
D) 5, 4, 2, 3, 1

Question 6

An entity is allowed to group biological assets with similar characteristics for measurement purposes.

Question 7

Biological assets that are attached to land are not measured separately from the land.

Question 8

Agricultural produce is measured at fair value less costs to sell at the point of harvest.

Question 9

The fair value of a biological asset or agricultural produce is its market price less any costs to get the asset ready to market. Costs to sell include commissions, transfer taxes and duties.

Question 10

Subsequent changes in the value of biological assets are recognized in other comprehensive income.

Question 11

Young McDonald Company purchased a tract of land filled with fruit trees whose fruit the company plans to harvest and sell. The only purpose of the purchase was to obtain the biological assets on the land. Therefore, YMC values the land and the biological assets together. Assess the company's valuation approach.

Question 12

Explain the importance of accounting for agricultural assets as it relates to the Conceptual Framework.

Question 13

Explain the following terms:
-Capability of change

Question 14

Explain the following terms:
-Management of change

Question 15

Explain the following terms:
-Measurement of change