Which of the following is true about biological assets under
(b) The requirement is to identify the true statement
about biological assets under IFRS. Answer (b) is correct because
biological assets are living animals or plants and must be
disclosed as a separate item on the balance sheet.
Roland Corp. signed an agreement with Linx, which requires
that if Linx does not meet certain contractual obligations,
Linx must forfeit land worth $40,000 to Roland. Roland’s accountants
believe that Linx will not meet its contractual obligations,
and it is probable Roland will receive the land by the end of
year 2. Roland uses IFRS for reporting purposes. How should
Roland report the land?
(c) The requirement is to identify how Roland should
report the land. Answer (c) is correct because IFRS provides that
a contingent asset is a possible asset that arises from past events,
and is confirmed only by the occurrence of uncertain future
events that are not within the control of the reporting entity. A
contingent asset is not recognized, but it is disclosed in the notes
to the financial statements if the economic benefits are probable.
Answer (a) is incorrect because it does not meet the definition of
an asset. Answers (b) and (d) are incorrect because contingent
assets are not recognized in the balance sheet.