Fair Value Change — Price Component (Market Price Movement)
Separately recording the portion of biological asset fair value change attributable solely to market price movements (commodity price changes) versus physical biological growth — as encouraged by IAS 41 for analytical disclosure.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Biological Assets (Livestock/Crops) | Asset (+) | 2,200.00 | - |
| Change in Fair Value — Price Component (Market Movement) | Revenue (+) | - | 2,200.00 |
💡 Accountant's Note
IAS 41 para 51(c) encourages entities to disclose separately the two drivers of fair value change: (1) PRICE CHANGE — the gain or loss arising purely from a movement in the market price of the commodity (e.g., cattle spot price increases by 5%) while the herd remains physically unchanged; (2) PHYSICAL CHANGE — the gain or loss from biological transformation (growth, maturation, production). Separating these gives management and investors better insight into how much profit is driven by favorable market conditions versus the farm's own productivity. In practice, this separation requires establishing the prior-period quantity at current-period prices to isolate the price effect. For cattle: if 100 head valued at $800/head last year are now valued at $850/head (market alone), the price gain is $5,000 before any physical growth.
Practitioner & Systems Framework
💻 ERP Architecture
Most agricultural ERP modules (SAP AgriFood, Agrivi, FarmERP) allow split recording of FV movements. The reconciliation approach: (a) Revalue prior period quantity at current prices → price gain; (b) Value current period quantity at current prices less (a) → physical gain. Document the method and apply consistently.
⚠️ Audit Flags
Auditors verify that the split is mathematically consistent and that the total of price + physical changes equals the total FV movement for the period. Improper splitting can obscure poor biological performance behind favorable market prices.
📄 Required Documentation
Herd/crop census data at period start and end, commodity market price data at both dates, and reconciliation worksheet showing the split calculation.
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