Gain from Changes in Fair Value of Biological Assets
Increase in the value of livestock or crops as they grow or prices rise, on the Profit and Loss statement. Farms and agro firms only.
In detail
Biological assets are living animals and plants held for farming: a dairy herd, a tea garden, a fish pond. NFRS, following IAS 41, measures them at fair value less costs to sell at every reporting date, and the change in that value, whether from growth, births or price movements, is recognised in profit through this ledger. The asset side is the Biological Assets ledger under Non-Current Assets. A travel company will not use it, but an agro-tourism resort with a herd or an orchard will. Fair value comes from local market prices for animals of the same age and breed. Because the gain is unrealised, taxable farming income can differ, and farming income enjoys partial exemptions the auditor must track.
Formula
Gain = Fair value less costs to sell at year end - Carrying amount at start of year - Purchases + Sales of the assets
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Biological Assets | Rs 80,000 | |
| Gain from Changes in Fair Value of Biological Assets | Rs 80,000 |
How to record it in BRAccount
- 01Count the herd or crop at Ashadh end and price it from current local market rates less selling costs.
- 02Go to Invoicing > Journal Entry > New dated the year end.
- 03Debit Biological Assets and credit this ledger with the increase; reverse the lines for a decrease.
- 04Submit. The entry below posts.
- 05Keep the valuation working and the count sheet attached for the auditor.
When to use it
Post by Journal Entry at year end when Biological Assets are revalued.
Example from the demo books
Dr Biological Assets Rs 80,000, Cr Gain from Changes in Fair Value of Biological Assets Rs 80,000 as the Chitwan herd grew.