One Approach to Revenue Recognition Proposed for Biological Assets Is

question 15

Multiple Choice

One approach to revenue recognition proposed for biological assets is to recognise volume changes as revenue or expense but to treat price changes as an adjustment to equity through a reserve.Arguments that support this approach include:

• A) Price changes have not been realised and so should not be recognised in the statement of comprehensive income.
• B) Treating price changes as a non-distributable reserve protects the operating capability of the entity.
• C) The biological development of a self-generating and regenerating asset is clearly distinguishable and separately measurable from changes in price.
• D) The treatment should be equivalent to that used in other reporting standards such as AAS 25 Financial Reporting by Superannuation Funds.

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Definitions:

Opaque

Not allowing light to pass through; not transparent or translucent.

Chemical Components

The basic constituents or substances that make up a chemical compound or matter, characterized by specific physical and chemical properties.

Physical Properties

Characteristics of a material that can be observed or measured without changing the substance's identity, such as density, color, or melting point.

Phosphorous

A reactive, nonmetallic element essential for life, involved in energy transfer and the formation of bones and teeth.