Past paper yanong june 2015 part b

3 months to 3 months to Total
31 January 2015 30 April 2015
$ million $ million $ million
Cash inflows 80 80
Cash outflows (8) (19) (27)
Notional rental
charge for land (1) (1) (2) –– ––– –––
Net cash flows (9) 60 51
Discounted at 2% (8·82) 57·67 48·85
Thus in the quarterly accounts at 31 October 2014, the maize fields should be recognised at $68·85 million ($20 million
land plus $48·85 million maize). A fair value gain of $48·85 million should be shown in profit or loss less the operating
costs of $10 million.
At 31 January, Yanong has revised its projections for cash inflows to $76 million, which means that the net cash flows at
that date were projected to be $(76 – 19 – 1) million, i.e. $56 million. Discounted at 2%, this amounts to $54·9 million.
Thus a fair value gain of $(54·9 – 48·85) million, i.e. $6·05 million, should be shown in profit or loss together with the
actual operating costs of $8 million.
At the point of harvest, on 31 March 2015, the maize is valued at $82 million which means that a fair value gain of $(82 –
54·9) million, i.e. $27·1 million, is recognised in profit or loss and the maize is classified as inventory. The actual operating
costs for the quarter would also be shown in profit or loss. When the maize is sold, a further profit of $(84 – 82) million, i.e.
$2 million, is made on sale.
I am not clear that as valuation technique is used so should we have to discount all the future cash flows? like if we are making quarterly accounts at 31 oct 014 than the fair value at this point will be the present value of all total future cash flows? like of (9) and 60 which is 51
At 31 january as cash flow projections are revised so at that point also should we have to calculate present value of future cashflows and how we get gain of 6.05million? please explain with regards to biological assets as they are measured at fV less cost to sell but how we will recognize at fair value less cost to sell here ? thanks in advance