Question 1
The accountant of Brew Teas Plantation reports the activities of Brew Teas
Plantation Bhd which includes: grows of tea bushes, harvest the tea leaves and
produces tea. Brew Teas exports its tea to Thailand, Singapore and Indonesia.
a) Explain whether the activities reported by Brew Teas Plantation Bhd are within
the scope of MFRS141- Agriculture.
Grows tea bushes
MFRS141 – Biological asset, except for bearer plants
Harvest the tea leaves
MFRS141 – Activity of harvesting tea leaves
Produces tea
MFRS 102—Inventory applies
Brew Teas Plantation is involved in agricultural activity under MFRS 141 as the
company is managing biological assets (Tea Bushes) to generate agricultural produce.
Growing tea bushes and producing tea are not within the scope of MFRS 141—
Agriculture.
b) Explain which standards are applicable if the activities are not within the scope
of MFRS 141.
Tea bushes meet the definition of a bearer plant and are within the scope of MFRS
116— Property, Plant and Equipment. Tea is the finished product, hence MFRS 102—
Inventory applies
c) Explain how the tea bushes and tea leaves are measured in the financial
statements.
Tea bushes are measured in accordance with MFRS 116—Property, Plant and
Equipment. Picked tea leaves are agricultural produce and measured in accordance
with MFRS 141— Agriculture, i.e. at its fair value less cost to sell at the point of harvest.
After harvesting – measured based on MFRS 102 – lower of cost or NRV. NRV –
estimated selling price – estimates cost to sell.
Question 2
Following is a list of activities of related to agricultural activities:
a) Ocean Fishing
b) Clearing forest to create farm land.
c) Eel farming.
d) Cultivating orchards
e) Managing Vineyards.
f) Manufacturing furniture
g) Growing rubber trees.
h) Growing oil palms.
i) Processing of grapes into wine.
Required:
i) Explain whether the above activities meet the definition as per MFRS 141.
(a) No. Ocean fishing is not an agricultural activity because there is no management of
biological transformation occurring. Harvesting biological assets from unmanaged
sources, such as ocean fishing, is not agricultural activity.
(b) No. Clearing forests to create farmland Clearing forests to create farmland does not
meet the definition of agricultural activity.
(c) Yes. Eel farming is an agricultural activity because there is management of
biological transformation occurring for sale or for conversion into agricultural produce.
(d) Yes. Cultivating orchards is an agricultural activity because there is management of
biological transformation occurring for sale or for conversion into agricultural produce.
(e) Yes. Managing vineyards is an agricultural activity because there is management of
biological transformation occurring for sale or for conversion into agricultural produce.
(f) No. Manufacturing furniture not an agricultural activity; it is a finished product that
is the result of processing after harvest. (as it is finished product)
(g) Yes. Growing rubber trees is an agricultural activity because there is management
of biological transformation occurring for sale or for conversion into agricultural
produce.
