Financial Accounting: Heritage and Biological Assets Analysis Report

This report delves into the accounting principles governing heritage and biological assets, crucial topics within financial accounting. It examines the characteristics of heritage assets, including their unique cultural, historical, or environmental attributes, and discusses the application of AASB 116 for their recognition, measurement, and classification. The report explores valuation methods like the Contingent Valuation Method (CVM) and the Travel Cost Method (TCM). It also covers biological assets, defined under AASB 141, focusing on agricultural activities and the classification and measurement of these assets, highlighting the limitations of historical cost approaches. Furthermore, it addresses the accounting for agricultural produce, emphasizing the valuation of inventory at the lower of cost or net realisable value. The report references key academic sources and provides a comprehensive understanding of these specialized accounting areas.

Accounting for
Heritage and
Biological Assets

Introduction to Historical Assets
• Asset with the historic, artistic, geophysical or technological
qualities held and maintained, which are primarily hold and
maintained by the institutions are specific because of the
knowledge and culture contribution done by them.
• The recognition, measurement and classification of the
historical asset can be in specific to the AASB 116.
• Some of the common form of heritage assets can be
national parks, national monuments, museum and libraries,
which are unique, and substitute of the same is not found
easily.

Introduction to Biological Assets
• Accounting for Biological Asset can be done with the help of
the AASB 141 as a management by entity of the biological
transformation of the biological assets, that are held for
sale for the purpose of agricultural production or additional
biological assets.
• In terms of defining the asset, the application of AASB 141
should be well applied for the production of the Agricultural
products and biological asset except for the bearer plants.

Accounting for Heritage Assets
• The heritage and cultural assets can be recognised and
measured reliably in accordance with the AASB 116.
• Heritage Assets acquired at minimal cost or for a minimum
nominal cost is necessarily to be recognised at the fair value
at the date of acquisition for the company.
• Heritage and Cultural Assets, which are to be recognised in
the financial statement, must provide expected future
economic benefits. Ownership of the asset must be well
stated and transaction giving rise to the control must
already have occurred (Woon, Chatterjee & Cordery, 2019).

Valuation of Heritage Assets
• Contingent Valuation Method (CVM): The valuation
method involves valuing a particular resources based on
the purchasing party willing to pay for the same asset.
• Travel Cost Method (TCM): The Cost of the heritage
asset can also be done with the help of the costs that are
generally incurred for the construction of the asset and
particularly individuals on the other hand who are willing to
pay for the resources that are used for the construction of
the resources.

Accounting for Biological Assets
• The accounting standard that are applied for accounting of
various agricultural activity like the:
• Biological Assets, except for bearer plants
• Products specifically related to Agricultural, which are at
point of harvesting.
• On, the other hand trees held as forestry operations,
animals held as part of the livestock operations,
aquaculture are some of the key components of the
Biological Assets and recognised as per AASB 141 (Argilés-
Bosch et al., 2018).

Common Example of Biological
Assets

Classification and Reporting of
Financial Statements
• Reporting of the Biological Asset needs to be recorded
separately in the financial statement of the company i.e.,
the Balance Sheet of the company (Hana & Patrik, 2017).
• Classification and recognition of the biological asset as
current or non-current asset would be significantly
dependent on the intentions of the Management.

Measurement of Biological Assets
• The measurement of the biological asset cannot be significantly done
using the historical cost approach because of the following limitations:
• It ignores the accretion in the values which are based through the
natural events.
• Price changes are generally neglected.
• Necessary information in terms of the assets are generally not
provided when associated with historical cost approach.
• There might be comparable forecast, which can be applied but with
the application of the historical cost, the same cannot be applied by
the management of the company (Silva & Nardi, 2018).

Accounting for Agricultural
Produced
• Agricultural produced of biological asset as defined by
AASB 141, as done with the help of the harvested products
of the entity’s biological assets. Fruit pulled from trees,
wool shorn from sheep and slaughtered livestock are some
of the common forms included as Agricultural Produced
goods.
• In accordance with the AASB 102, the valuation of the
inventory will be done at the lower of cost or at net
realisable value from the products.

Conclusion
• Accounting for both the Heritage Assets and Biological
Asset can be well done with the help of the various
accounting standard for the company.
• Classification and recording of the asset can be well done
with the help of the AASB 116 Accounting for Heritage
Assets and AASB 141 Accounting for Biological Assets were
well stated with the help of the standards and regulations
mentioned.

References
• Abbott, M., & Tan‐Kantor, A. (2018). Fair Value Measurement and Mandated Accounting Changes: The Case of the
Victorian Rail Track Corporation. Australian Accounting Review, 28(2), 266-278.
• Woon, P. P., Chatterjee, B., & Cordery, C. J. (2019). Heritage reporting by the Australian public sector: Possibilities from
the concepts of new public governance. Accounting, Auditing & Accountability Journal.
• Hu, F., Percy, M., & Yao, D. (2015). Asset revaluations and earnings management: Evidence from Australian companies.
Corporate Ownership and Control, 13(1), 930-939.
• Pilcher, R. (2018). Depreciation in local government—still the problems continue. In Public Sector Accounting,
Accountability and Governance (pp. 30-42). Routledge.
• Argilés-Bosch, J. M., Miarons, M., Garcia-Blandon, J., Benavente, C., & Ravenda, D. (2018). Usefulness of fair valuation
of biological assets for cash flow prediction. Spanish Journal of Finance and Accounting/Revista Española de
Financiación y Contabilidad, 47(2), 157-180.
• Hana, B., & Patrik, S. (2017). Will the amendments to the IAS 16 and IAS 41 influence the value of biological assets?.
Agricultural Economics, 63(2), 53-64.
• Silva, R. M., & Nardi, P. (2018). The (in) Difference between Historical Cost and Fair Value for Biological Assets: A Cross-
Country Study.
• Bohušová, H., & Svoboda, P. (2018). Biological assets: impact of measurement on financial position and performance of
SMEs. In Forum Scientiae Oeconomia (Vol. 6, No. 2018) Issue No. 1: Competitiveness of the modern organization:
human, ethical and innovative aspects, pp. 19-32). Wydawnictwo Naukowe Akademii WSB.