IAS 41 and HKAS 41 are applied to account for the following when they relate to agricultural activity:

1. Biological assets;
2. Agricultural produce at the point of harvest; and
3. Government grants related to a biological asset.

According to IAS 41 and HKAS 41, a biological asset is “a living animal or plant” and an agricultural produce is “the harvested product of the entity's biological assets”.

Agricultural activity covers a wide range of activities, including raising livestock, forestry, annual or perennial cropping, cultivating orchards and plantations, floriculture, and aquaculture (including fish farming). Examples of biological assets in relation to the above activities may include cattle, pigs, sheep, chickens, ducks, fish, shrimps, lobsters, abalones, vegetables, fruits, etc.

According to IAS 41 and HKAS 41, an entity shall recognize a biological asset or agricultural produce when, and only when:

1. The entity controls the asset as a result of past events;
2. It is probable that future economic benefits associated with the asset will flow to the entity; and
3. The fair value or cost of the asset can be measured reliably.

A biological asset shall be measured on initial recognition and at the end of each reporting period at its fair value less costs to sell, except for the case where the fair value cannot be measured reliably.