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Zoneco's Challenges: Fair Value Measurement of Biological Assets

Zoneco Group Company Limited (獐子岛集团) (SHE: 002069), was one of China’s leading seafood aquaculture companies. Established in 1958 and headquartered in Dalian, Liaoning, in China, Zoneco specialized in the cultivating, processing, saleselling, and trading of aquaculture products. The company’s operations relied heavily on the growth and health of its biological assets, whose values were exposed to environmental risks, market price fluctuations, and biological uncertainties.

The case explored the application of International Accounting Standard (IAS) 41: Agriculture in Zoneco’s aquaculture business, particularly how the standard governed the accounting measurement of biological assets (work-in-process), their transformation to aquaculture produce (finished goods). It detailed how Zoneco applied IAS 41 in the measurement and remeasurement of these assets, particularly when active markets for immature biological assets were absent. It also detailed and compared with the measurement of aquaculture produce inventory under IAS 2, Inventories.    

This case invites discussions on the complexities of implementing IAS 41’s fair value measurement requirements within the unique context of the operations of aquaculture businesses.
 

Year of Publication: 2025
Ref. No.: 25/834C
Discipline: Accounting & Control
Industry: Agricultural Products
Country/Region: China (People's Rep. of)
Company: Zoneco Group Company Limited
Languages: English
Pages of Text: 9

Learning Objective:

  1. Examine the initial measurement and remeasurement of biological assets under IAS 41, including their impact on financial statements in aquaculture businesses.
  2. Analyze IAS 41 accounting principles for establishing allowances for write-downs to net realizable value and impairments of biological assets/ or agricultural produce.
  3. Evaluate factors influencing fair value measurement of biological assets, including internal control weaknesses.
  4. Identify challenges accountants face in applying fair value measurements to biological assets and agricultural produce.
  5. Examine the difference of initial measurement and remeasurement of aquaculture produce inventory under IAS 2 and how it differs from IAS 41 for biological assets. 

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