[seva1994]

Many thanks for a comprehensive analysis. Yes, I have to be careful to make sure that the recognition criteria is reasonable because we will apply it consistently in future years as it’s not a one off expenditure. We will go on buying dogs in future years as well.

@Cardine said:
Please take the time and apply the information – cementing knowledge. The activity of that company need the dogs to enhance its safety measures and there is a clear distinsion between capital and revenue expenditure.

The business is airline services which MUST have security measures. The information is clear as we already know and should apply the knowledge gain during studies. Look at it: A security firm owns guard dogs that work with its security personnel to provide security services.

The guard dogs meet the definition of biological assets—a living animal (see
paragraph 5 of IAS 41)—and the definition of PPE in IAS 16 because they are tangible
assets used in the provision of security services in more than one accounting period.

The biological asset exemption from the scope of IAS 16 does not apply to the guard
dogs because they are not related to agricultural activity (ie although the dogs are
controlled by the entity, their biological transformation—the process of growth,
degeneration, production, and procreation that causes qualitative or quantitative changes
in a biological asset—is not managed by an entity for harvest of biological assets for sale or for conversion into agricultural produce or into additional biological assets).

Consequently, the guard dogs are within the scope of IAS 16 – only if this airline company were offering security services to the public; its operation MUST be protected with the use of the dogs – operation cost, and maintenance for services renderd to keep them healthy – food and vetinary expenses.

The key point is the nature of business activity. The dogs enhance the security measures to operate safely.

palmy said:
I think detection dogs are within the scope of IAS 16. Have a look at the document in this link, page 13, 14.There is a similar example for guard dogs.

In every situation – we should identify the points and note them, seek clarification – assessing information receive before we take action. VERY good questions and we should use for knowledge application.

[seva1994]

Thanks. In fact they are purchased for security reasons just like any equipment bought for the same reason which is recognized as an asset and depreciated over its useful life but the fact that they are actually living animals rather than just equipment make me confused.

@palmy said:
I think detection dogs are within the scope of IAS 16. Have a look at the document in this link, page 13, 14.There is a similar example for guard dogs.

https://www.ifrs.org/Use-around-the-world/Education/Documents/Framework-based%20teaching%20materials/2014%20Stage2%20FBT_PPE_final.pdf

[seva1994]

Many thanks for the answer. The objective of IAS 41 is to establish standards of accounting for agricultural activity – the management of the biological transformation of biological assets (living plants and animals) into agricultural produce (harvested product of the entity’s biological assets. Yes our dogs obviously aren’t used for agricultural purpose. But the amount of money we paid for them is significant and meets recognition criteria of assets by tax authorities so if we write them off as an expense our expenses will be significantly higher than that of previous year.

@Cardine said:
NO Colleague – ordinary cost, security and maintenance. The nature of this business does not allow you to classify them as ASSETS – no.

The company must be aware that they’re lives – biological assets is not the answer. Read the standards.

Regards,

[seva1994]

Actually, the purpose of the question is to emphasize that revaluation of non-current assets should be added to profit when determining available profit for dividend. However the 2000 loss was not deducted from current year’s profit which is weird since it probably will be deducted for tax purposes.

[seva1994]

Thanks for the answer 🙂

@biggles said:
I thought one of the reasons was because, until the first AGM, the directors had been appointed by the promoter so the first AGM is the first opportunity for the shareholders to select their board of directors

[seva1994]

Thanks for the answer. 🙂

[seva1994]

Thanks for the answer. 🙂

@biggles said:
I thought one of the reasons was because, until the first AGM, the directors had been appointed by the promoter so the first AGM is the first opportunity for the shareholders to select their board of directors

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