For recognition of a biological asset, what condition must be met regarding economic benefits?

For the recognition of a biological asset, it is fundamental that there is a probability of realizing economic benefits in the future. This focus on the likelihood of future economic benefits ensures that the asset is not only present but also capable of contributing positively to the entity's financial position.

In the context of biological assets, such as livestock or crops, this means that the asset has the potential to generate revenue, whether through direct sale or production of goods. Evaluating the probability of these economic benefits provides a basis for the asset's recognition in financial statements. It's crucial to align this recognition with the concept of prudence in accounting, which emphasizes the importance of not overestimating future economic benefits.

While ownership rights are important for control of the asset, and appreciation in value or profitability may be desirable, they are not strict criteria for the recognition of a biological asset under financial reporting standards. The emphasis on probable realization of economic benefits helps ensure that assets are recognized in a way that reflects their true economic potential.