Transfer of Biological Assets Between Related Parties (IAS 24 — Market Price Basis)
Recording the transfer of livestock or growing crops between related entities (parent-subsidiary, between farms under common ownership) at market value with related party disclosure under IAS 24.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Intercompany Receivable / Cash — Related Party | Asset (+) | 50,000.00 | - |
| Biological Assets — Transferred (Derecognized at Fair Value) | Asset (-) | - | 45,000.00 |
| Gain on Transfer of Biological Assets to Related Party | Revenue (+) | - | 5,000.00 |
💡 Accountant's Note
Related party transactions in agriculture — common between family-owned farm groups, agribusiness holding structures, and cooperative networks — must be disclosed under IAS 24 and measured at fair value (market price) to reflect the economic substance. Pricing biological assets at below-market rates in related party transactions can artificially shift profits between entities (e.g., from a taxable entity to a tax-exempt cooperative or trust). The receiving entity records the biological asset at the transfer price (which may differ from the transferring entity's book value). The gain or loss on transfer reflects the difference between the fair value transferred and the transferor's book value. In consolidated financial statements, inter-group transfers are eliminated in full.
Practitioner & Systems Framework
💻 ERP Architecture
All related party transactions must be flagged at the time of recording for IAS 24 disclosure purposes. Maintain a related party register (subsidiaries, associates, joint ventures, key management personnel). Transfer prices should be documented with reference to comparable market transactions.
⚠️ Audit Flags
(1) Transfer pricing — is the price truly at market (arm's length)? (2) Consolidation elimination — in consolidated accounts, are all intercompany gains eliminated? (3) IAS 24 disclosure completeness — are all related party relationships and transaction volumes disclosed?
📄 Required Documentation
Related party agreement, market price evidence (comparable sales), transfer pricing analysis, IAS 24 disclosure schedule, and group consolidation elimination workings.
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