What defines a biological asset?

A biological asset is defined as a living thing that is controlled by an entity, typically as part of agricultural activities. This definition encompasses plants and animals that are cultivated or managed for agricultural production purposes, such as cattle, sheep, crops, and trees. Biological assets are unique in that they involve both biological transformation and financial aspects, focusing on their growth, production, and potential economic benefits.

In accordance with accounting standards, this definition is crucial because it highlights the asset's living nature and emphasizes control and ownership by the entity. Biological assets require specific accounting treatment that considers their growth patterns and production capabilities over time, which is distinct from other types of assets such as tangible fixed assets or financial assets. Understanding this definition helps in correctly classifying and reporting biological assets in financial statements, an essential aspect of agricultural accounting.