Determ­in­ing fair value can be chal­len­ging for bio­lo­gic­al assets due to their unique char­ac­ter­ist­ics and mar­ket con­di­tions. IAS 38 is an inter­na­tion­ally recog­nised account­ing stand­ard under IFRS, mean­ing that com­pan­ies apply­ing IFRS in dif­fer­ent cap­it­al mar­kets must fol­low the same rules when account­ing for intan­gible assets. This uni­form­ity enhances com­par­ab­il­ity across com­pan­ies in dif­fer­ent jur­is­dic­tions, which is essen­tial for investors who diver­si­fy their port­fo­li­os glob­ally. The valu­ation and depre­ci­ation meth­ods applied to tree assets also play a sig­ni­fic­ant role in shap­ing fin­an­cial out­comes. For instance, employ­ing the fair value mod­el can lead to fluc­tu­ations in asset val­ues due to mar­ket con­di­tions, impact­ing equity and poten­tially lead­ing to impair­ment charges if mar­ket val­ues decline. Con­versely, using the cost mod­el provides sta­bil­ity but may not fully reflect cur­rent asset val­ues, influ­en­cing investor perception.

Biological Transformation

IFRS® is the IFRS Foundation’s registered Trade Mark and is used by Sim­lo­gic, s.r.ounder licence dur­ing the term and sub­ject to the con­di­tions con­tained therein. IFRS Sus­tain­ab­il­ity Dis­clos­ure Stand­ards are developed to enhance investor-com­pany dia­logue so that investors receive decision-use­ful, glob­ally com­par­able sus­tain­ab­il­ity-related dis­clos­ures that meet their inform­a­tion needs. The bio­lo­gic­al assets ifrs UK site includes all Inter­na­tion­al con­tent (see the sep­ar­ate list­ing by click­ing the ‘Inter­na­tion­al’ tab above), with PwC guid­ance tailored to the UK, as well as all of our UK GAAP con­tent. Please con­tact the IFRS Found­a­tion for details of coun­tries where its Trade Marks are in use and/or have been registered. You have to make your best effort to answer that ques­tion cor­rectly, because the account­ing and report­ing depends on it. I rarely pub­lish art­icles about spe­cif­ic sec­tors, but this time, I decided to make an exception.

Why Viewpoint?

Use View­point to access the latest news, PwC guid­ance, web­casts, research mater­i­als and full text of the author­it­at­ive account­ing stand­ards and sus­tain­ab­il­ity dis­clos­ure stand­ards. For example, if two com­pet­ing tech com­pan­ies are lis­ted in dif­fer­ent coun­tries but both apply IAS 38, investors can more eas­ily com­pare their respect­ive R&D cap­it­al­isa­tion and amort­isa­tion policies and the value of their intan­gible assets. This in-depth guide explores how to appro­pri­ately account for intan­gible assets under IFRS, includ­ing its scope and meas­ure­ment, impacts and inform­a­tion your aud­it­ors will need from you.

Classification of Trees

• With­in this frame­work, spe­cif­ic stand­ards such as IAS 41 Agri­cul­ture guide the account­ing treat­ment of bio­lo­gic­al assets, emphas­iz­ing their fair value meas­ure­ment and the recog­ni­tion of changes in value through profit or loss.
• This meth­od accom­mod­ates the unique growth and yield char­ac­ter­ist­ics of dif­fer­ent tree spe­cies and con­siders factors like har­vest cycles and mar­ket demand.
• Level 3 inputs, which are unob­serv­able and rely on the entity’s own assump­tions, are fre­quently used for bio­lo­gic­al assets due to the lack of act­ive markets.
• Accur­ately valu­ing these assets is neces­sary for provid­ing stake­hold­ers with a clear pic­ture of an entity’s fin­an­cial health.
• If you are unable to access an eBook, please see our Help and sup­port advice or contact

Improp­er valu­ation can lead to fin­an­cial mis­state­ments, which could poten­tially impact on both the acquirer’s and the tar­get company’s stock prices. Depre­ci­ation reflects the gradu­al reduc­tion in value of tan­gible assets over time. For busi­nesses man­aging tree assets, espe­cially bear­er plants, apply­ing depre­ci­ation is integ­ral to main­tain­ing accur­ate fin­an­cial records. Under IFRS, bear­er plants are depre­ci­ated over their use­ful life, ensur­ing the cost of the asset is matched with the rev­en­ue it helps gen­er­ate. Cal­cu­lat­ing depre­ci­ation requires determ­in­ing the asset’s use­ful life, sal­vage value, and select­ing an appro­pri­ate meth­od, such as straight-line or declin­ing bal­ance. The dis­tinc­tion between con­sum­able and bear­er plants influ­ences how these assets are recorded.

Financial Services

After this point, such meas­ure­ment will be the asset’s cost and will be neces­sary to apply IAS 2 Invent­or­ies. Regis­tra­tion is required to access the free ver­sion of the Issued Stand­ards, which do not include addi­tion­al doc­u­ments that accom­pany the full stand­ard (such as illus­trat­ive examples, imple­ment­a­tion guid­ance and basis for con­clu­sions). Users pur­chase a licence for their sole use, and they can access the site at any time on any device.

• IAS 41 requires dis­clos­ure of the aggreg­ate gain or loss arising dur­ing the cur­rent peri­od on ini­tial recog­ni­tion of bio­lo­gic­al assets and agri­cul­tur­al pro­duce and from the change in fair value less costs to sell of bio­lo­gic­al assets.
• Depre­ci­ation reflects the gradu­al reduc­tion in value of tan­gible assets over time.
• Well, once you detach the agri­cul­tur­al pro­duce from a bio­lo­gic­al asset, in oth­er words – once you har­vest the pro­duce, it becomes your invent­or­ies and you apply IAS 2 Inventories.
• The fair value approach assesses the asset’s mar­ket price in an act­ive mar­ket, offer­ing transparency.
• Con­tract prices are not neces­sar­ily rel­ev­ant in determ­in­ing fair value, because fair value reflects the cur­rent mar­ket in which a will­ing buy­er and seller would enter into a transaction.

In this art­icle, I out­lined just a few crit­ic­al ques­tions related to the cor­rect report­ing of agri­cul­tur­al activ­it­ies. In many devel­op­ing coun­tries, agri­cul­tur­al activ­it­ies rep­res­ent one of the most import­ant sources of income. Once you have viewed this piece of con­tent, to ensure you can access the con­tent most rel­ev­ant to you, please con­firm your ter­rit­ory. These mater­i­als were down­loaded from PwC’s View­point (viewpoint.pwc.com) under license.

IFRS Accounting

This meth­od accom­mod­ates the unique growth and yield char­ac­ter­ist­ics of dif­fer­ent tree spe­cies and con­siders factors like har­vest cycles and mar­ket demand. It requires detailed assump­tions about growth rates, har­vest­ing costs, and mar­ket prices, mak­ing it resource-intens­ive but poten­tially more reflect­ive of the asset’s long-term value. Bio­lo­gic­al assets with­in the scope of IAS 41 should be meas­ured on ini­tial recog­ni­tion and at sub­sequent report­ing dates at fair value less costs to sell (point-of-sale costs). Gov­ern­ment grants – assets meas­ured at cost less accu­mu­lated depre­ci­ation and impair­ment IAS 20 will apply. Bio­lo­gic­al assets should be meas­ured at ini­tial recog­ni­tion, and at the end of each report­ing peri­od , at fair value less estim­ated costs to sell. Offer­ing real-time updates, PwC-cur­ated con­tent pages and user-friendly shar­ing fea­tures, View­point helps you find the insights, intel­li­gence and con­tent you need when you need it.

Prop­erly valu­ing, depre­ci­at­ing, and account­ing for these liv­ing resources is essen­tial for busi­nesses in forestry, agri­cul­ture, and real estate devel­op­ment. Explore the fin­an­cial aspects of tree assets, includ­ing valu­ation, depre­ci­ation, and tax implic­a­tions, and their impact on fin­an­cial state­ments. Valu­ation tech­niques for bio­lo­gic­al assets may include mar­ket-based approaches, cost approaches, and income approaches. For instance, a mar­ket-based approach might involve com­par­ing the asset to sim­il­ar assets in the mar­ket, while an income approach could involve dis­count­ing future cash flows expec­ted from the asset. The estim­a­tion of fair value will be determ­ined by apply­ing the require­ments of IFRS 13 Fair Value Meas­ure­ment. Fair value is the price that would be received to sell the bio­lo­gic­al asset or agri­cul­tur­al pro­duce in an orderly trans­ac­tion between mar­ket par­ti­cipants at the meas­ure­ment date.

 Email This Post