Apr 29, 2026
By: Rebeca Sequeira
Financial Analyst - EAS LATAM
Biological assets represent one of the most sensitive elements in the accounting of productive sectors. Their value does not depend only on the cost incurred, but also on variables such as growth, climatic conditions, expected yield and market prices. This means that the economic performance of the business occurs before the sale and, therefore, must be reflected in the financial statements on a timely basis.
Practical case: forestry company in Guanacaste
A forestry company establishes a teak plantation with an initial investment of CRC 150 million. By the third year, due to the growth of the trees and favorable market conditions, the estimated fair value rises to CRC 260 million.
If the company keeps the asset at cost, its financial statements continue to reflect CRC 150 million. However, under IAS 41, a gain of CRC 110 million should be recognized in profit or loss, reflecting the real value creation of the asset.
This adjustment directly impacts indicators such as EBITDA, equity and financing capacity, completely changing how third parties perceive the business.
Note to the financial statements (reference model)
Biological assets correspond to forestry plantations intended for timber production. These assets are measured at fair value less costs to sell, determined based on discounted cash flow models and observable market prices. Changes in fair value are recognized in profit or loss in the period in which they occur.
Linkage with IFRS S2
IFRS S2 introduces the obligation to disclose climate-related risks and opportunities. In the case of biological assets, factors such as droughts, pests or temperature variations directly affect their fair value.
For example, a reduction in rainfall may decrease the projected growth of a plantation, affecting its valuation and generating losses. These variations not only impact the financial statements, but must also be disclosed as material risks under IFRS S2.
Conclusion
Proper measurement of biological assets allows the economic reality of the business to be reflected and future risks to be anticipated. The integration between IAS 41 and IFRS S2 is not optional in sectors exposed to environmental variables, but rather a necessary step toward more transparent and useful financial information.
References
IAS 41 - Agriculture (IASB)
IAS 12 - Income Taxes (IASB)
IFRS S2 - Climate-related Disclosures (IFRS Foundation)
Ministry of Finance of Costa Rica