Biological assets
In one sentenceLiving animals or plants owned by an agricultural business to grow or produce from, such as sheep and poultry; they are usually measured at fair value less costs to sell.
Simply put
Sheep on a farm grow, gain weight and give birth, so their value changes every month. That is why IAS 41 measures them at fair value less costs to sell, with the change recognized in profit or loss.
A fruit-bearing palm tree itself is treated as a fixed asset, while the dates growing on it are a biological asset until harvested.
Worked example
A farm owns 100 head of cattle at year-end; the market price per head is 6,000 SAR, and costs to sell are 2% of the value (an assumed rate for illustration).
Fair value: 100 × 6,000600,000 SAR
Costs to sell: 600,000 × 2%12,000 SAR
Value of the biological assets in the statements: 600,000 − 12,000588,000 SAR
Formula: Carrying amount = Fair value − Costs to sell
Don't confuse it with
Property, plant and equipmentA fixed asset is usually measured at cost less depreciation, and a biological asset at fair value because it grows and changes.