Exam 9: Accounting for Heritage Assets and Biological Assets

Discuss the weaknesses of using historical cost basis in the valuation of biological assets.In your answer you should consider the trade-off between relevance and reliability.

Which of the following are considered agricultural produce,hence should be reclassified to inventory?

AASB 141 requires biological assets to be measured at:

Outline the different ways an entity engaged in agricultural activity could recognise revenue.

Lynne-Melinda Ltd operates a large scale lavender farm supplying companies producing high quality essential oils in the Riverina region.On 30 June 2012 the farm was independently appraised and the lavender farm valued at $500 000.On 31 October 2012 lavender seed flowers that had a fair value less costs to sell of $100 000 were harvested and sold on the same day for the same amount.Picking costs and delivery charges to point-of-sale was $10 000.On 30 June 2013 the farm was valued at $550 000. What is the net profit for Melinda and Lynne Ltd on 30 June 2013?

AASB 1037 and AASB 141 have been criticised on the grounds that:

Providing financial information about heritage assets:

A unique characteristic of biological assets includes:

In accordance with the requirements of the AASB Framework,accounting standard setters should ensure that the benefits from required disclosures exceed the costs incurred by entities in making them.The costs associated with a disclosure are specified by the AASB Framework to include:

In order to apply the contingent-valuation method to heritage assets it is necessary to decide whether or not leisure time should be charged at an individual's wage rate.

Where a biological asset is not separable from other assets:

A contentious issue with heritage assets is valuation.This is a concern because:

Roberts,Staunton and Hagen (1995)propose that biological assets be subject to a classification scheme that differs from other assets.This scheme would require:

Biological assets are defined in AASB 141 as a 'living animal or plant'.

What is the accounting treatment for a non-living product of a biological asset in accordance with AASB 141 Agriculture?

AASB 101 requires heritage assets to be disclosed separately on the statement of financial position.

AASB 141 prohibits the classification of biological assets as current or non-current.

The arguments against recognising heritage assets in a financial sense include:

Lynne-Melinda Ltd operates a large scale lavender farm supplying companies producing high quality essential oils in the Riverina region.On 30 June 2012 the farm was independently appraised and the lavender farm valued at $500 000.On 31 October 2012 lavender seed flowers that had a fair value less costs to sell of $100 000 were harvested and sold on the same day for the same amount.Picking costs and delivery charges to point-of-sale was $10 000.On 30 June 2013 the farm was valued at $550 000. What journal entry is required on 31 October 2012 to recognise the harvest of lavender seeds?

AASB 141 excludes certain biological assets from its scope.To be included: