Accountancy Forum

what is the depriciation method related to live stock?

The accounting of livestock is dealt with in IAS 41 Agriculture according to which
Biological assets should be measured on initial recognition and at subsequent reporting dates at fair value less estimated point-of-sale costs, unless fair value cannot be reliably measured. [IAS 41.12]

The gain on initial recognition of biological assets at fair value, and changes in fair value of biological assets during a period, are reported in net profit or loss. [IAS 41.26]

The question of depreciation of live stock can only arise if there is an inability to measure Fair Value reliably.

IAS 41.31 "There is a presumption that fair value can be measured reliably for a biological asset. However, that presumption can be rebutted only on initial recognition for a biological asset for which market-determined prices or values are not available and for which alternative estimates of fair value are determined to be clearly unreliable. <b>In such a case, that biological asset should be measured at its <i><u>cost less any accumulated depreciation</u></i> and any accumulated impairment losses</b>. Once the fair value of such a biological asset becomes reliably measurable, an enterprise should measure it at its fair value less estimated point-of-sale costs."

IAS 41.33 "In determining cost, accumulated depreciation and accumulated impairment losses, an enterprise considers IAS 2, Inventories, IAS 16, Property, Plant and Equipment, and IAS 36, Impairment of Assets."

IAS 41.54 "If an enterprise measures biological assets at their cost less any accumulated depreciation and any accumulated impairment losses (see paragraph 30) at the end of the period, the enterprise should disclose for such biological assets

(a) a description of the biological assets;

(b) an explanation of why fair value cannot be measured reliably;

© if possible, the range of estimates within which fair value is highly likely to lie;

<b>(d) the depreciation method used;

(e) the useful lives or the depreciation rates used</b>; and

(f) the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period."

I believe that in such a rare situation, when the fair value of the biological asset cannot be measured reliably, the depreciation should be charged according to the useful life of the asset.
You might find Page 450-451 of the book "Auditing Principles and Practice" by Ravinder Kumar and Virender Sharma, quite interesting, where they have mentioned the depreciation method developed by the National Dairy Research Institute of India. You can view the book on the following link
http//books.google.com.pk/books?id=3I2yT25BtWEC&dq=Auditing+Principles+and+Practice&printsec=frontcover&source=bl&ots=AdYEJ7JcGQ&sig=_jQFLT1bvvSsFpf7KJvfJx0Gpr4&hl=en&ei=jr8ZSuHvGpOTkAWVpJ2ADQ&sa=X&oi=book_result&ct=result&resnum=3#PPA450,M1