IAS 41 Accounting for Biological Assets

[Shafi]

Dear members,
I have a serious problem with application of IAS 41.
I have my maize farm which is has maize plants which are one month old. It takes about six months to harvest. There is no market for such immature maize plants. According to IAS 41, biological asset need to be valued at fair value less point-of sale costs. If fair value cannot be established, then one can value it at cost less accummulated depreciation and armotization. But there is no way my plant will depreciate, it will only appreciate in value and there is no mention in IAS 41 of treatement of value appreciation! How do I manouver out of this quagmire?

The other issue is IAS 41 Para 35 requires that if the grant is conditional, it shall be recognized as income when, and only when, the attached conditions are met.
When are we going to recognize government grant as income if there is a condition attached to it that an entity not to engage in specified agricultural activity?

[noman]

based on general understanding i can say this...others may correct me..

for 1st question regarding measurment...if ur reporting date comes whent there is no market value for the produce..then as per standard you have to keep it at cost.....and as soon as market value is determinable u will reclassify the asset to the fairvalue model with gain taken to p&l..

alternatively if reporting date comes when the produce has some fair value then u just measure it at the reporting date...

as for the grant..

if u are sure that you are not going to engage in the prohibited agriculutural activity..you should recognise it as income since you have received the grant already..

if you decide to engage in the prohibited activity..and the grant becomes repayable then you will recognise a provision when the grant becomes repayable..

[Shafi]

Thanks noman for your contributions. Please follow this scenario.
I have accumulated the cost of maize up to March when they are ready for harvest. The accumulated costs at this point are seeds USD 3000, fertilizer USD 1000, laborers USD 1000. At March the maize had a market value of USD 6000. Transportation to market costs USD 100 and agent costs at the market are USD 50. The harvested maize will need to be moisturized for three months before they can be sold. The fair value after three months is expected to be the same i.e. USD 6000. After moisturization, the maize will be packed at a cost of USD 200 before they can be sold in the market. I will appreciate if double entries for these transactions and ending balance sheet and income statement will be demonstrated.
Regards