Deck 20: Agriculture

Question 1

Which of the following is NOT one of the recognition criteria contained within IAS 41 in relation to recognition of a biological asset or agricultural produce as an asset?

A) the asset has physical form
B) the entity controls the asset as a result of past events
C) it is probable that future economic benefits associated with the asset will flow to the entity
D) the fair value or cost can be reliably measured

Answer 1

A

Question 2

IAS 41 requires disclosure of which of the following?
I aggregate gain or loss on initial recognition of biological assets
II fair value of agricultural produce harvested during the period, at point of harvest
III fair value changes attributable to physical changes
IV fair value changes attributable to price changes

A) I and II only
B) I, II and III only
C) II, III and IV only
D) I, II, III and IV

Answer 2

I and II only

Question 3

Milko owns dairy cattle. The market value of the cattle is calculated by reference to the litres of milk able to be produced and the lactation rate of the cows. The cattle are regularly sold at auction. Costs incurred to transport the cattle to auction are €500 per truck. Each truck can transport approximately 100 cattle. $\begin{array}{ll}\text { Number of mature cows held at } 30 \text { June } 2016 & 5000 \\\text { Average litres of production per cow } & 6000 \text { litres } \\\text { Lactation rate } & 50 \% \\\text { Price per litre } & 40 \text { cents }\end{array}$
The market value for each cow at 30 June 2016 is:

A) €1000
B) €1195
C) €1200
D) €1205

Answer 3

€1200

Question 4

Which of the following require disclosures to be made under IAS 17 and IAS 41?

A) operating and financing leases by lessors and lessees
B) finance leases by lessors and lessees only
C) operating and finance leases by lessees only
D) operating and finance leases by lessors only

Question 5

Which of the following statements is correct in relation to government grants?

A) Government grants for biological assets measured at fair value are accounted for under IAS 41.
B) Government grants for biological assets measured at cost are accounted for under IAS 41.
C) Government grants for biological assets measured at fair value are accounted for under IAS 20.
D) Government grants for biological assets measured at cost are accounted for under IAS 18.

Question 6

Agricultural produce is defined in IAS 41 as:

A) a living animal or plant
B) a living product capable of biological transformation
C) the harvested product of the entity's biological assets
D) the detachment of produce from a biological asset or cessation of a biological asset's life processes

Question 7

Which of the following would be disclosed in the Statement of Financial Position as a biological asset under IAS 41?

A) Vines
B) Picked fruit
C) Cotton
D) Timber

Question 8

Which of the following is NOT a cost to sell?

A) commissions to brokers
B) transfer taxes and duties
C) levies by regulatory agencies
D) transport costs to get assets to a market

Question 9

Fishy Co. operates a fish farm. IAS 41 requires live immature fish to be valued at:

A) cost due to the absence of an active market for such fish
B) the fair value less costs to sell based on prices of slaughtered immature fish
C) either cost or fair value less estimated costs to sell
D) fair value determined by applying a discount factor to the fair value of live mature fish.

Question 10

Which of the following is NOT considered an agricultural activity?

A) oyster farming
B) ocean fishing
C) pearl farming
D) fish farming

Question 11

When determining the fair value of biological assets and there is no market price for that asset in its present condition IAS 41 requires that:

A) the entity uses the present value of expected net cash flows from the asset discounted at a current market-determined pre-tax rate.
B) the entity measure the asset at cost.
C) the entity uses the contract prices for recent sales of similar assets adjusted for the effects of biological transformation.
D) the entity uses sector benchmarks.

Question 12

Which of the following is NOT a reason as to why the IASC felt that agriculture was an industry that needed its own industry specific standard?

A) the specific exclusion of assets related to agricultural activity from other standards
B) agriculture was considered to be an emerging industry at that time
C) accounting guidelines for agricultural activity previously developed by national standard setters had been piecemeal
D) the nature of agricultural activity had created uncertainty or conflicts when applying traditional accounting models

Question 13

At 30 June 2017 the fair value of WineCo's vineyard is €2.5 million. At 30 June 2017 the following information is available: $\begin{array} { l l } \text { Fair value of vines prior to harvest at 31 March 2017 } & € 3,100,000 \\\text { Fair value of grapes harvested at 31 March 2017 } & € 500,000 \\\text { Estimated costs to sell - grapes } & € 10000 \\\text { Estimated costs to sell - vines } & € 20,000\end{array}$
There have been no changes in fair values between 1 April and 30 June 2017.
At 30 June 2017 the vines will be recorded in WineCo's financial statements at an amount of:

A) €2 580 000
B) €2 600 000
C) €2 980 000
D) €3 100 000

Question 14

At 30 June 2017 the fair value of WineCo's vineyard is €2.5 million. At 30 June 2017 the following information is available: $\begin{array} { l l } \text { Fair value of vines prior to harvest at 31 March 2017 } & € 3,100,000 \\\text { Fair value of grapes harvested at 31 March 2017 } & € 500,000 \\\text { Estimated costs to sell - grapes } & € 10,000 \\\text { Estimated costs to sell - vines } & € 20,000\end{array}$
The entry to recognise the grapes at the point of harvest is:

A) $\begin{array} { l l l l } \text { DR } &\text { Agricultural produce } - \text { grapes } & 500,000\\\text { CR } &\text { Biological asset - vines }& 500,000 & \\\end{array}$
B) $\begin{array}{lll}\text { DR } & \text {Agricultural produce - grapes } &510,000\\\text { CR } & \text { Cash } & 10,000 \\\text { CR } & \text { Biological asset - vines } & 500,000\end{array}$
C) DR $\quad$ Agricultural produce - grapes $\quad 500,000$
CR $\quad$ Profit \& loss $\quad 500,000$
D) $\begin{array}{lll}\text { DR}&\text { Agricultural produce - grapes } & 490,000 \\\text { CR}&\text { Profit \& loss } & 490,000\end{array}$

Question 15

IAS 41 applies to the accounting for the following when they relate to agricultural activity:
I agricultural produce
II biological assets
III land related to agricultural activity
IV government grants

A) I, II and III
B) II, III and IV
C) I, II and IV
D) I, III and IV

Question 16

IAS 41 requires that biological assets be measured as follows:

A) on initial recognition and at the end of each reporting period at fair value less costs to sell
B) on initial recognition and at the end of each reporting period at its fair value less costs to sell, except where the fair value cannot be measured reliably
C) at fair value-less estimated costs to sell at the point of harvest
D) at fair value less costs to sell at the point of harvest

Question 17

IAS 41 considers that there are three common features to agricultural diversity. Which of the following is NOT one of those features?

A) measurement of change
B) management of change
C) capability to change
D) change transformation

Question 18

Which of the following meets the definition of agricultural produce?

A) Dairy cattle
B) Milk
C) Cheese
D) Yoghurt

Question 19

Increases in fair value over cost in relation to land used for agricultural purposes is recognised in equity when the land is:

A) an investment property measured at fair value and accounted for under IAS 40
B) an investment property measured at cost and accounted for under IAS 40
C) not an investment property, is measured at fair value and accounted for under IAS 16
D) not an investment property, is measured at cost and accounted for under IAS 16

Question 20

The entry required when an animal is born on a pig farm is:

A)
DR $\quad$ Biological asset $\quad$$\quad$ XX
CR $\quad$ Profit \& Loss $\quad$$\quad$$X X$
B)
DR $\quad$ Agricultural produce $\quad$$\quad$ XX
CR $\quad$ Profit & Loss $\quad$$\quad$ XX
C)
DR Profit & Loss $\quad X X$
CR Biological asset $\quad XX$
D)
DR $\quad$ Profit & Loss $\quad XX$
CR $\quad$ Agricultural produce $\quad \mathrm { XX }$

Question 21

Use the following information to answer questions
Cow Co. is a company that farms dairy cattle. Cow Co. owns the farmland on which the cattle are located, having purchased it for £1.5 million in 2013. The land is measured at cost under IAS 16.
Details of cattle at 30 June 2015 were as follows:
$\begin{array}{lcc}&\text { Cows } & \text { Heifers } \\\text { Number }&900 & 200 \\\text { Fair value (less estimated costs to sell) }&£ 800 & £ 320\end{array}$ During the year ended 30 June 2016 the following occurred:
$\bullet$ 200 new cows were purchased at £810 each
$\bullet$ 50 heifers matured into cows
$\bullet$ 5 heifers died
$\bullet$ 100 cows were sold for £830 each
$\bullet$ The price change between a heifer and a cow at the time of maturity during the year was estimated to be £500
The following is relevant at 30 June 2016:
$\bullet$ The land has been valued at £5.6 million
$\bullet$ Fair value less estimated costs to sell are as follows (Cow Co. has determined that these are the appropriate fair values to use for the purposes of transfers and deaths of heifers):
o Cows - £850 /head
o Heifers - £350/head

-The fair value of cows as at 30 June 2016 is:

A) £943 250
B) £892 500
C) £875 000
D) £816 500

Question 22

Which of the following is NOT considered to be agricultural produce?

A) timber
B) sugar
C) wool
D) milk

Question 23

Use the following information to answer questions
Cow Co. is a company that farms dairy cattle. Cow Co. owns the farmland on which the cattle are located, having purchased it for £1.5 million in 2013. The land is measured at cost under IAS 16.
Details of cattle at 30 June 2015 were as follows:
$\begin{array}{lcc}&\text { Cows } & \text { Heifers } \\\text { Number }&900 & 200 \\\text { Fair value (less estimated costs to sell) }&£ 800 & £ 320\end{array}$ During the year ended 30 June 2016 the following occurred:
$\bullet$ 200 new cows were purchased at £810 each
$\bullet$ 50 heifers matured into cows
$\bullet$ 5 heifers died
$\bullet$ 100 cows were sold for £830 each
$\bullet$ The price change between a heifer and a cow at the time of maturity during the year was estimated to be £500
The following is relevant at 30 June 2016:
$\bullet$ The land has been valued at £5.6 million
$\bullet$ Fair value less estimated costs to sell are as follows (Cow Co. has determined that these are the appropriate fair values to use for the purposes of transfers and deaths of heifers):
o Cows - £850 /head
o Heifers - £350/head

-The increase in fair value of livestock attributable to price change is:

A) £76 000
B) £57 000
C) £25 000
D) £6 000

Question 24

Rural Co. received a $100 000 grant from the government on 1 July 2016. One of the conditions attached to the grant was the Rural Co had to continue farming in the same location for the following two years, otherwise the grant would have to be retuned in full. The entry to record the receipt of the grant is:

A) $\begin{array}{llll}\text { DR } &\text { Cash }& 100,000 \\\text { CR }& \text { Revenue } & 100,000 \\\end{array}$
B) $\begin{array} { l l l l } \text { DR } & \text { Cash } & 100,000 & \\ \text { CR } & \text { Revenue } & 50,000 \\\text { CR } & \text { Performance obligation } & 50,000\end{array}$
C) $\begin{array} { l l l r } \text { DR } & \text { Cash } &{ 100,000 } \\ \text { CR } & \text { Performance obligation } & 100,000\end{array}$
D) No entry required as the grant is conditional and cannot be recognised until the conditions attached to the grant are met.

Question 25

IAS 41 requires disclosure of which of the following relating to government grants?

A) the nature and extent of grants recognised, unfulfilled conditions attached to the grant and significant increases expected in the level of government grants.
B) the nature and extent of grants recognised, unfulfilled conditions and other contingencies attached to the grant and details of grants applied for but not yet granted
C) unfulfilled conditions and other contingencies attached to the grant and details of grants applied for but not yet granted
D) the nature and extent of grants recognised, unfulfilled conditions and other contingencies attached to the grant and significant decreases expected in the level of government grants.

Question 26

Which of the following statements is NOT correct?

A) Management facilitates biological transformation
B) Management is a key part of the definition of agricultural activity under IAS 41
C) There is a link between management and control of a biological asset
D) Management is a key part of the recognition criteria for biological assets and agricultural produce

Question 27

Which of the following is an agricultural product?

A) tea
B) milk
C) coffee
D) fruit juice

Question 28

According to IFRS 13 Fair Value Measurement, the market used to determine fair value should be:

A) the principal market, or, in the absence of a principal market, the relevant market
B) the most advantageous market
C) the relevant market
D) either the principal market, or, in the absence of a principal market, the most advantageous market

Question 29

Which standard was issued in 2011 that amended IAS 41?

A) IFRS 7
B) IAS 1
C) IAS 18
D) IFRS 13

Question 30

It is common for companies applying IAS 41 to:

A) attempt to 'bury' the fair value movements attributable to agricultural assets in 'other expenses'
B) separately disclose the fair value movements attributable to agricultural assets in the statement of profit or loss and other comprehensive income or the notes
C) disclose the fair value movements attributable to agricultural assets as part of 'abnormal' items
D) remain silent in the financial statements about the fair value movements attributable to agricultural assets, but highlight such items in 'financial commentaries'