When should a company account for wildlife on it's statement of financial position ?


  Your View  
An entity must include a biological asset or agricultural produce in its statement of financial position when the following criteria are satisfied:
1. The entity controls the asset as a result of past events.
 2.It is probable that future economic benefits or service potential associated with the asset will flow to the entity.
 3.The entity can measure the fair value or cost of the asset reliably.
Wildlife is controlled when it is fenced in by means of a game fence and the entity has ownership thereof as a result of a past event i.e. the purchase thereof. The question arises what if the greater property( for example Klaserie) is fenced in but the entity is not so that the animals are free to roam. Surely the asset cannot be considered to be controlled ? What about the situation where it is possible to determine the fair value but the cost to do so is so high that it is not feasible ?



Firstly you should assess whether the wildlife is an asset. The Framework considers this by assessing whether it is probable that future economic benefits will flow to the company and whether the item has a cost that can be measured reliably.

If it is an asset, you then need to consider what type of asset it is. The starting point would be IAS 41 (AC 137) - Agriculture.

Generally a normal game farm does not fall under IAS 41. A normal game farm would be the one where they just have wild animals on the farm and people come and do viewing. Hunting may be incidental. If, however, they breed animals for sale to other game farms, then it would fall under IAS 41.

In considering whether wildlife is in the scope of IAS 41 please consider the following:

There is no doubt that the game is a biological asset.(a living animal or plant.) The next issue is then whether the biological assets relate to agricultural activity wich is defined as the management by an entity of the biological transformation of biological assets for sale, into agricultural produce, or into additional biological assets. IAS 41 states:
Agricultural activity covers a diverse range of activities; for example, raising livestock, forestry, annual or perennial cropping, cultivating orchards and plantations, floriculture, and aquaculture (including fish farming). Certain common features exist within this diversity:
(a) Capability to change. Living animals and plants are capable of biological transformation;
(b) Management of change. Management facilitates biological transformation by enhancing, or at least stabilising, conditions necessary for the process to take place (for example, nutrient levels, moisture, temperature, fertility, and light). Such management distinguishes agricultural activity from other activities. For example, harvesting from unmanaged sources (such as ocean fishing and deforestation) is not agricultural activity; and
(c) Measurement of change. The change in quality (for example, genetic merit, density, ripeness, fat cover, protein content, and fibre strength) or quantity (for example, progeny, weight, cubic metres, fibre length or diameter, and number of buds) brought about by biological transformation is measured and monitored as a routine management function.

You therefore need to assess whether the client engages in agricultural activity. Certainly the wildlife is capable of change. Therefore the issue is whether the change is managed and measured. Management refers to managing the game so that it is sold or results in additional game. Biological transformation is defined as the processes of growth, degeneration, production, and procreation that cause qualitative or quantitative changes in a biological asset'

There is unlikely to be one answer that fits all wildlife.

Note that even if you are in the scope of IAS 41, the wildlife would only be recognised in terms of this standard if the following are met

An entity shall recognise a biological asset or agricultural produce when, and only when:
(a) the entity controls the asset as a result of past events;
(b) it is probable that future economic benefits associated with the asset will flow to the entity; and
(c) the fair value or cost of the asset can be measured reliably.

The issue of whether it is feasible (from a cost perspective) to determine the fair value would not be considered as there is no exemption in this regard in the paragraphs that you refer to. Therefore the main issue would be whether the wildlife is being viewed only or also sold.