GOVERNMENT ACCOUNTING MANUAL

(For National Government Agencies)

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 1

 Session 6
Applying Accounting
Procedures on Agriculture

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 2

Session Overview
Recognition
Measurement
Presentation and disclosure

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 3

Learning Objective
At the end of this session, you will be able
to apply proper accounting treatment and
recording of biological assets and
agricultural produce, in accordance with
standards and procedures in Chapter 11 of
the GAM.

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 4

Example-Cattle farm

Entity A raises cattle, slaughters them, and

sells the carcasses to the local meat market.

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 5

Example-Vineyard

Entity B grows grapevines, harvests the

grapes and produces wine. Which of these
activities are in the scope of accounting on
Agriculture?

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 6

 EXERCISE 6-A

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 7

Question No.1

All of the following would be classified as biological

asset, except

a. Dairy Cattle
b. Chickens
c. Eggs
d. Trees

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 8

Question No. 2

Which of the following would be classified as

agricultural produce?
a. Tree
b. Bush
c. Butter
d. Mango

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 9

Question No.3

Is managing animal-related recreational activities

considered agricultural activity?

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 10

Question No.4

Agricultural activity includes all of the following,

except
a. Raising livestock
b. Perennial cropping
c. Aquaculture
d. Ocean fishing

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 11

Question No.5
Are the following biological assets or agricultural
produce related to agricultural activity?

a. Trees being grown for lumber

b. K9 dogs used by security guards
c. Plants and Trees in the parks.

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 12

Suggested Answers:

1. C. Eggs
2. D. Apple
3. No
4. D. Ocean Fishing
5. a. Yes
b. No
c. No

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 13

 Biological Assets

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 14

Classification of
Biological Assets

Held for harvest as

agricultural produce or
for sale or distribution
Consumable
at no charge or for a
nominal charge

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 15

Classification of
Biological Assets
used repeatedly or
continuously for
more than one year
Bearer in an agricultural
activity
self - generating

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 16

Agricultural Produce

the
harvested
product of
the entitys
biological
assets.

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 17

 Agricultural activity
Management by an entity of the biological transformation and
harvest of biological assets for:
Sale;
Distribution at no charge or for a nominal charge;
Conversion into agricultural produce or into additional biological
assets

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 18

Common Features of
Agricultural Activity

Capability to
Change
Management of
Change
Measurement of
Change

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 19

Biological Transformation
Growth

Degeneration

Procreation

Production of agricultural produce

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 20
Presentation

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 21

Recognition

Future economic FV or cost can

Controls the
benefits or be measured
asset
service potential reliably

Biological Assets
Agricultural
Produce
GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 22
Measurement
Biological Asset
1. Initial Recognition and at 2. FV is clearly unreliable
each reporting period Cost less accumulated
Fair value (FV) less costs to depreciation and any
sell accumulated impairment
losses

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 23

Measurement

Agricultural Produce

FV less cost to sell at the point

of harvest

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 24

DETERMINATION OF FAIR VALUE
Group according to significant attributes

Existence of contracts

Deduct from the fair value of combined assets

Existence of the active market

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 25

DETERMINATION OF FAIR VALUE
If an active market does not exist:

1. Recent market transaction price

2. Market prices for similar assets

3. Sector benchmarks

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 26

Gain or Loss under Agriculture
1.Initial 2.1 Due to
Recognition Physical
Biological
Assets Changes
2. Changes in
FV 2.2 Due to
Price Changes

Agricultura Initial
l Produce Recognition

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 27

Presentation

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 28

Initial Recognition
Illustrative Accounting Entries:When Purchased (3 yr. old cow)
FV - P63,000 Costs to Sell - P1,000

Account Title Debit Credit

Breeding Stocks 62,000
Loss on Initial Recognition of Biological Assets 1,000
Cash, MDS, Regular 63,000

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 29

RECOGNITION OF CHANGES IN FAIR VALUE
Due to physical changes and price changes
Illustrative Accounting Entries: When animal is born
Date Age FV less costs to sell
1/1/2015 New born 40,000
12/31/2015 New born 55,000
12/31/2015 1 y/o 60,000

Account Title Debit Credit

Breeding Stocks 40,000
Gain on Initial Recognition of Biological Assets 40,000

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 30

 RECOGNITION OF CHANGES IN FAIR VALUE
Due to physical change and price change
December 31, 2015 : New born calf is now 1 y/o
Date Age FV less costs to sell Computation:
1/1/2015 New born 40,000 FV 12/31/2015 (New born) 55,000
12/31/2015 New born 55,000 FV 1/1/2015 (New born) 40,000
12/31/2015 1 y/o 60,000 Price Change 15,000
FV 12/31/2015 (1 y/o) 60,000
FV 12/31/2015 (New born) 55,000
Physical Change 5,000
Account Title Debit Credit
Breeding Stocks 20,000
Gain from Changes in Fair Value Less Costs to Sell due to
Price Change 15,000
Gain from Changes in Fair Value Less Costs to Sell due to
Physical Change 5,000
GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 31
RECOGNITION OF CHANGES IN FAIR VALUE
Due to physical changes and price changes
After 1 year: (3 y/o is now 4 y/o)
Date Age FV less costs to sell
1/1/2015 3 y/o 62,000
12/31/2015 3 y/o 70,000
12/31/2015 4 y/o 69,000

Account Title Debi Cred

t it
Breeding Stocks 7,000
Loss from Changes in Fair Value Less Costs to Sell of Biological
Assets due to Physical Change 1,000
Gain from Changes in Fair Value Less Costs to Sell of Biological
Assets
GAM: due to Price Session
Accounting Change 6: Applying Accounting Procedures on Agriculture Slide 6 - 32 8,000
Agricultural Produce

Ex. Fruit Trees

Agricultural Produce Held for
Consumption/Sale/Distribution xxx

Gain on Initial Recognition of

Agricultural Produce xxx

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 33

COST RELATING TO BIOLOGICAL ASSETS

Ex. Salaries of Caretaker

Salaries and Wages Casual/
Contractual xxx
Cash, MDS, Regular xxx

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 34

Forms
1. Biological Assets Property Card

Acquisition, Description, Custody,

Transfer, Disposal and Other information

Reconciled with the physical inventory of

assets

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 35

Biological Assets Property Card
(BAPC)

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 36

Forms

2. Quarterly Report of Biological

Assets
QRBA QRBA

Maintained by Every quarter of

Accounting Unit reporting period

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 37

Quarterly Report of Biological Assets
(QRBA)

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 38

 Procedures - Acquisition
Supporting
documents
Submits copy
Caretaker/ Records in of approved
DR the BAPC
Officer-in- Receives the
IAR
charge Approved
Caretaker
IAR

Accounting
Prepares Posts in GJ, GL
Division/Unit JEV and SL

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 39

 Procedures Gain or Loss due to Price
Change
Table of
Caretaker/ Posts in Current FV Submits
Current Prepares QRBA & Table
Responsible FV
the BAPC
QRBA of Current FV
Person

Gain or
Accounting Loss on FV Prepares Posts in GJ, GL
Unit due to Price JEV and SL
Change

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 40

 Procedures Gain or Loss due to Physical
Change
Prepares Submits
Caretaker QRBA QRBA

Gain or
Accounting loss on Prepares Posts in GJ,
Unit Fair JEV GL and SL
Value

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 41

Disclosure
Aggregate gain or loss

Description of each biological assets

Distinguish between mature and immature biological

assets

Where FV of biological assets cannot be measured

reliably

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 42

Disclosure
Methods and significant assumptions applied in
determining the FV of each group of agricultural
produce

FV less costs to sell of agricultural produce

harvested during the period, determined at the
point of harvest

Reconciliation of changes in the carrying amount

of biological assets

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 43

GAM: Accounting Session 6: Applying Accounting Procedures on Agriculture Slide 6 - 44