CAF-1 · Chapter 7 · Question 4 of 15
An entity acquires a herd of cattle. Due to the deduction of estimated costs to sell, the fair value less costs to sell is lower than the purchase price. How is this difference accounted for?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Recognized immediately as a loss in profit or loss.
Explanation
A loss may arise on the initial recognition of a biological asset because costs to sell are deducted in determining fair value less costs to sell. This loss must be included in profit or loss in the period it arises.
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