Valuation of corps

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Querist : Anonymous

Querist : Anonymous (Querist)

23 July 2013 I have a query regarding valuation of plants as closing stock. One of our client has replication project of banana plants but we are facing problem regarding valuation of closing stock because standard is silent in this issue, so please clarify that it will cost or market value (whichever is lower) or as per management valuation.

CA Pooja Agarwal

CA Pooja Agarwal (Expert)

23 July 2013 IAS 41 prescribes, among other things, the accounting treatment for biological assets during the period of
growth, degeneration, production, and procreation, and for the initial measurement of agricultural produce at
the point of harvest. It requires measurement at fair value less costs to sell from initial recognition of biological
assets up to the point of harvest, other than when fair value cannot be measured reliably on initial recognition.
This Standard is applied to agricultural produce, which is the harvested product of the entity’s biological
assets, only at the point of harvest. Thereafter, IAS 2 Inventories or another applicable Standard is applied.
Accordingly, this Standard does not deal with the processing of agricultural produce after harvest; for example,
the processing of grapes into wine by a vintner who has grown the grapes.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Costs to sell include commissions to brokers
and dealers, levies by regulatory agencies and commodity exchanges, and transfer taxes and duties. Costs to
sell exclude transport and other costs necessary to get assets to a market. Such transport and other costs are
deducted in determining fair value (that is, fair value is a market price less transport and other costs necessary
to get an asset to a market).
IAS 41 requires that a change in fair value less costs to sell of a biological asset be included in profit or loss for
the period in which it arises. In agricultural activity, a change in physical attributes of a living animal or plant
directly enhances or diminishes economic benefits to the entity.

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