What are Biological Assets? Recognition and Measurement

Overview:

Biological assets are assets that are living in nature. It includes trees, animals, and nowadays cannabis too, as it has been made legal. The company’s management breaks down the assets side of the balance sheet and classifies them by type and attributing a value to them.

Biological assets are dealt with in International Accounting standards 41 (IAS 41). As per IAS 41, biological assets are any living plant or animal owned by the business. These are typically measured at fair values less selling costs.

Examples of biological assets include goats, fish, vegetables, corn, tomatoes, apples, etc. Biological assets are generally perishable and are like current assets in the balance sheet.

Nature of Biological assets:

Biological assets are held and can be accounted for only by the business owners. These assets are important to farmers and individuals whose primary source of profit comes from growing, selling, and shipping biological goods.

They are the active components in the environment; hence, they are always difficult to maintain. They are always under the radar of qualitative and quantitative threats.

Importance of Biological Assets:

Biological assets generate substantial revenue or income for businesses in vineyards, floriculture, silviculture, and paper products.

Biological assets are typically seen in the balance sheet of these companies in industries. The only distinguishing feature for biological assets is that it is a living thing.

The major difference of biological assets is that biological assets change naturally and depreciate naturally and more rapidly than other types of goods.

Various biological assets like other goods can be in high or low demand depending on the season of the product. Recently there has been a surge in demand for soybean  in the United States of America.

The threats suffered by biological assets include drought, cold weather, inconsistent rain, or forms of diseases. The biological asset is unique to accounting to categorize and identify assets owned by businesses clearly.

Recognition of Biological assets as per IFRS:

An entity recognizes a biological asset when the entity controls the asset as a result of past events. It is fairly reliable to say that benefit will flow to the entity, and fair value can be measured reliably.

Measurement of Biological asset:

Biological assets come within the scope of IAS 41. Initial recognition is done, and at subsequent reporting dates, the biological assets are recognized at fair value less estimated costs to sell, unless a fair value cannot be reliably estimated.

The gain on initial recognition of biological assets at fair value fewer costs to sell and changes in fair value fewer costs to selling biological assets during a period are included in profit or loss.

All other costs related to biological assets measured at fair value are recognized as expenses when incurred, other than costs to purchase biological assets. 

We have modified some words to make it more relevant

From the above we can deduce that TSH RESOURCES with Both Palm Oil Estates & Timber Forest Concession have fully made use of opportunities to plant the MOST TREES (both Palm Oil & Timber) Totalling a Whopping Rm408 MILLIONS IN VALUE OVER THE YEARS - FAR FAR MORE THAN BOTH SIMEDARBY PLANT & FGV

This shows TSH RESOURCES has Deep Deep Biological Assets Value which aughur well when both CPO & LUMBER ARE NOW AT THEIR HIGHEST PRICES IN WORLD MARKET

Best regards

Calvin Tan Research

Please buy or sell after doing your own due diligence. In doubt please consult your own Remisier or Fund Manager

EXTRA!  Answers to questions from fellow forumer

bahai4453 My question is : Can this biological asset made any impact on the

the company's financial performance ? Will this play a vital role in the

selection of investing target ?

27/07/2021 12:54 AM

This is a very good question indeed

1) Yes, biological assets continue to grow and increase in value year after year

See an example

THPLANT

See last qtr result under Note 17

Biological assets

Year ended 31.12.2020...Rm41.6 millions

Year 31. 3. 2021........Rm55.9 millions

So THPLANT assets are stated as below At 1 January

Change in fair value recognised to profit or loss...Rm14.278 Millions

SO IN JUST 3 MONTHS THPLANT BIOLOGICAL ASSETS INCREASED BY RM14.2 MILLIONS IN VALUE

What kind of Biological Assets THPLANT GOT?

Receorded in AR of THPLANT Under Property are Palm Oil Estates, Timber & Teak Wood Estates

TEAKWOOD?

YES! THPLANT HAS 3,000 ACRES OF PLANTED TEAKWOOD (All of highest value)

For TSH it has both Palm Oil & Timber Concession lands planted with Solid hardwood

These hardwood trees are used for Wood Flooring and sold by its subsidiary Ekowood

A land value will increase many times if Good Biological Assets are planted there

See how people who got Mau Sang Wang durian planted on their lands ask for exorbitant prices?

As of now TSH got Rm408 MILLIONS IN BIOLOGICAL ASSETS AND STILL GROWING IN VALUE