Introduction

Biological assets are defined as any living plant or animal owned by a business.

The International Accounting Standard 41 (IAS 41) is the widely accepted guideline developed to account for biological assets.

International Financial Reporting Standards (IFRS) are accounting rules that establish how businesses report accounting events. According to ifrs.org, IFRS 13 defines fair value, sets out a framework for measuring fair value, and requires disclosures about fair value measurements.

This document outlines the 365 Cannabis custom-developed solution that assists our clients in the cannabis industry to comply with IAS 41 and IFRS 13 using our biological asset add-on.

Setups

Biological assets posting group

Biological asset posting groups determine if fair value calculations are posted to the general journal and which accounts the amounts are posted to. Biological asset posting groups are attached to biological assets' fair value records.

Navigate to the Biological Asset Posting Group table under Administration.

Populate the following fields to add a new posting group:

Code – The code will be assigned to each item that will be included in the fair value calculation. This works similarly to other posting groups in the system.
Description – This is the description for the posting group.
Fair Value of Biological Asset Account – Your accounting team will determine this.
Unrealized Gain Account – Your accounting team will determine this.
Post to G/L - Select this option to post to the general ledger (G/L).

Biological asset fair value

The biological asset fair values page tracks the rates by period for items and item categories. When fair values are calculated by items the system will first check for records by item. If no values are found it will then look for a record for the item category assigned to the item.

Navigate to the Biological Asset Fair Values table under Administration.

Populate the following fields:

Key Fields:

Note: Source Type, Source No., Start Date, and End Date are the primary keys that define a new record.

Source Type – Defines if fair value is for an item category or a specific item.
Start Date – Defines the last date the rate is valid for. Can be left blank if the rate has no specific starting date.
End Date - Defines the last date the rate is valid for. Can be left blank if the rate does not expire.
Biological Asset Posting Group – Specifies the posting group used for the fair values entries.
Calculation Type – Specifies the type of calculation used. The following options are available (See Appendix 1 – Calculation type Formulas for details on each calculation type):
- Net Present Value
- Net Present Value Prorated
- Fair Value Less Cost to Sell
- Expected Market Value of Crop
Yield UOM – Specifies the unit of measure Estimated Yield is in.
Estimated Yield – The estimated yield amount per plant.
FVLCS Per Yield UOM – This field is non-editable and informational only. The field will auto calculate the Fair Value less the Cost to Sell per yield unit of measure. If the source type is Item Category the field Sample Item must be populated. Fair Value, Fair Value UOM, Estimated Yield and Estimated Yield UOM are required for this field to calculate.
Cost To Sell UOM – Specifies the unit of measure Cost to Sell is in.
Cost To Sell – The estimated cost to sell the biological asset.
Fair Value UOM - Specifies the unit of measure Fair Value is in.
Fair Value – The estimated fair value of the biological asset.
Market Item – Represent the item record that has the current market price. Only available when calculation type is Expected Market Value of Crop.
Sample Item – This is a place holder item used to get Item unit of measure conversions to calculate FVLCS per UOM when source type it Item Category.

Item category

Each Item entered in the Biological Asset Fair Value table must be assigned an item category. This item category must be marked with Include in Biological Asset in order to be included in each calculation type.

Navigate to the Item Categories list.

Select the Include in Biological Asset boolean.

Changes to this field will NOT affect item records already created.

Items

There are two fields on the Item card in the Costs & Posting FastTab:

Include in Biological Assets – Defaults from Item Category but can be changed. Only items with this field checked will be included in Biological Assets calculations.
Biological Asset Market Item – The item must be non-inventory to check this field. This signifies that this item is only used to track current market prices.

General journal templates

Biological Asset worksheets use general journal templates and general journal batches. It’s possible to manually create a general journal template before opening the calculation worksheets. If no journal template is created before opening the worksheet, then the system will auto-create the template. Auto-created templates will not add a source code.