Gamecock Farms, Inc.
Problem
Background
Gamecock Farms, Inc. (GFI), based in South Carolina, is a producer of agricultural products. The company is a wholly-owned subsidiary of a Brazilian parent company and therefore keeps its books under IFRS. Gamecock Farms produces four products: chickens, soybeans, corn, and ostriches. All four of these products have a growing cycle of less than one year. Information related to each of these products as on June 30, 2010, is as follows:
(1) The company has a flock of 100,000 chickens for which the company has incurred accumulated costs of $100,000. The chickens are not yet fully grown or ready for sale. When ready for sale, the expected cost to sell the chickens is $10,000. The local market price for live chickens is $1.30 per chicken.
(2) The company has 100 acres planted in spearmint, which will be harvested in August. The accumulated cost of the spearmint is $9,000, the estimated selling costs are $500. There is no reliable estimate of market price on June 30, 2010.
(3) The company has 5,000 bushels of soybeans harvested and stored. The accumulated cost of the soybeans is $8,000. The market price of soybeans at the time of harvest was $2.00 per bushel. The market price on June 30, 2010 is $2.10 per bushel. Transportation costs to be borne by the company to get the soybeans to market are estimated at $.05 per bushel.
(4) The company has 500 ostriches that are fully grown and have been available for sale since May 15, 2010. The company has incurred accumulated costs to date of $80 per ostrich. The company anticipates selling costs of $10 per ostrich. There is no local market for ostriches. The company sold 50 ostriches on May 16, 2010 to a customer in Atlanta, Georgia for $120 per ostrich. The company believes that the market price for ostriches has not changed substantially since that time and that it will be able to sell its current inventory of ostriches over the next two months.
Required: Discuss the general rules for accounting for agricultural products under IFRS. Determine the balance sheet valuation for Gamecock Farms, Inc.'s agricultural products on June 30, 2010 under IFRS.