Using MPERS for agricultural activities

Multiple-choice questions: In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please re-read the article before attempting the questions again

  1. Private entities that carry out agricultural activities have to comply with the requirement of Section 34 of MPERS. What are agriculture activities under the MPERS framework?

  2. Harvesting from unmanaged sources (such as fishing from the open sea and deforestation) is not agricultural activity. In addition, agricultural activities do not include using living animals for activities such as competitions, racing or exhibitions. Why are these not agriculture activities under MPERS?

  3. Eastcoast Farms Sdn Bhd has 700 beef cattle for meat production, 100 dairy cattle for milk production and 15 buffalos for pulling carts to distribute feed to its cattle. Female calves are retained by Eastcoast to maintain and expand its herds. Male dairy calves are sold soon after birth for as meat for trade. Male beef calves are sold for the beef trade when they are two years old. Mature dairy cows are sold for meat after they have produced milk for five years. Mature beef cattle are sold in the meat trade when they are nine years old. In this scenario, how does the company account for the 700 beef cattle and the 100 dairy cattle?

  4. Highway Agro Sdn Bhd has 800 beef cattle for meat production and 15 buffalos for pulling carts to distribute feed to its cattle. Female calves are retained by Eastcoast to maintain and expand its herds. Male beef calves are sold for the beef trade when they are two years old. Mature beef cattle are sold in the meat trade when they are nine years old. In this scenario, how does the company account for the 12 buffalos?

  5. An entity is required to use the fair value model for biological assets for which fair value is readily determinable without undue cost or effort. An entity shall measure a biological asset on initial recognition and at each reporting date at its fair value less costs to sell. Which of the following MOST accurately describes fair value less cost to sell method for biological assets under MPERS?

  6. The quoted price for an identical asset in an active market is the best measure and is therefore the first priority when determining the fair value of the asset. However if there is no active market, fair value can be determined using these alternative approaches -

  7. What method or basis should entity use to measure biological assets whose fair value is not readily determinable without undue cost or effort?

  8. Under the previous PERS framework, there was no explicit standard for agriculture activities and biological assets, and as such, MAS 8 - Pre-cropping costs was used to account for plantation activities. Which of the following is the major difference or change in MPERS in relation to agriculture activities compared to the previous PERS?

  9. MPERS does not explicitly provide any prescription for land used in agriculture activity. How should agriculture land therefore be treated?

  10. Agricultural produce is the harvested product of biological assets. It is crucial that the entity clearly distinguish the biological assets, agricultural produce and products that are the result of processing agricultural produce after harvest. Which of the following correctly distinguishes the three categories?