ACCA Applied Skills · Financial Reporting · Inventories and agriculture
Kestrel Farm owns a herd of dairy cows. Under IAS 41 Agriculture, how should the herd be measured at the end of the reporting period, assuming fair value can be measured reliably?
A dairy herd is a biological asset measured at fair value less costs to sell at each reporting date. Changes in that value are recognised in profit or loss, not in other comprehensive income or through depreciation.
- AAt fair value less costs to sell, with changes recognised in profit or lossCorrect
- BAt cost less accumulated depreciation and impairment
- CAt fair value, with changes taken to other comprehensive income
- DAt the lower of cost and net realisable value
Explanation
IAS 41 requires biological assets to be measured on initial recognition and at each reporting date at fair value less costs to sell. Gains or losses go to profit or loss, not OCI. Cost less depreciation is the treatment for bearer plants under IAS 16, not for animals.
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