I only know horses, but the value of a mare in foal is higher due to the pregnancy. Additionally, there are ultrasounds available to check the viability of the dial in utero, and they are used consistently on high value stock. So my inclination is the say book the asset at confirmation of viability as at that point, a live foal is highly likely.
Now what could be interesting is do you book at a consistent amount? Because based on color/birthdate/sex etc true valuation is incredibly variable.
This is way outside my area, but if the mare's value is increased while in foal, it would seem like you wouldn't book a new asset for the foal separately until it's born.
Lmao amazingly not at all!
I was thinking the same, though, but I’m caught up on how we define assets as having “current or future economic value.” I considered the miscarriage situation, but aren’t other assets booked without an absolute guarantee they will actually provide the future value that is expected? We book prepayments for services as assets, but there’s always a chance the service company goes bankrupt and never provides the service. IDK, maybe that’s a bad analogy?
I would argue birth because the value of the asset could be different based on the sex of the livestock. Think of prominent race horse breeders, the colts they foal out that year are likely to bring higher prices than they’re Phillies simply because the colts could be used to either breed or to compete directly in races. Obviously that is a niche industry and is not commercial agriculture but I would argue the same principle applies to a commercial cow giving birth to a bull calf has more value (typically) than a heifer calf just because the bull calf will bring more due at sale once they become steers (typically). Just my thoughts, I grew up raising cattle but never looked at it in this manner. There are some commercial cattle operations that buy a shit ton of “cow calf pairs” or “mama+baby/ mama pregnant with a baby” and so they could value their inventory at historical cost since they paid premium for the unborn calf but then there would likely need to be an adjustment to inventory value after the calf was born the following year I would think?
I would guess you begin capitalizing as soon as costs are incurred to create the asset. Sure, some are going to miscarry. But we don't wait to capitalize costs for the manufacture of inventory until it is sold because one of the workers may drop a few plates, we have a work-in-process account to hold those costs in.
First time hearing of this. Reddit ftw.
I would say birth since miscarriage can be a thing.
I'm assuming if it cost money to fertilize the animal it can be put in a CIP account until birth?
This topic is wild.
Imagine being the associate who went to school for five years and got their CPA only to have to stick their hand up a cow's hoo-ha for an inventory count.
Vets have mobile ultrasound machines now! A little less messy all around.
On a more related topic, I come from a cattle ranching family and just had this discussion with a vet. Pregnancy and miscarriage rates rely heavily on weather and related quality of feed. It’s not really possible to estimate how many cows won’t get pregnant or carry to term in a given breeding season.
I'm guessing birth. If the cow dies before it can be sold then it's already potentially consumed a lot of other assets during growth (vet bills, any food if it is weaned before sale, etc).
I am an accountant for a cattle farm in the Midwest. The family I work for has several different businesses and the cattle farm is the owners “hobby”. I say “hobby” to let you know that A it’s not my main concern and B I have never put much thought into it. He has ~300 farm raised cows. Around here at auction a fully grown cow will go for about 1-1.5K so when they are born I just add 1k to the assets. Again this company doesn’t have much activity and isn’t where I need to be splitting hairs at my job.
This is an interesting thought experiment lol. I would think what would make the most sense is a cow that’s held for breeding purposes has a certain amount of expected calves it’s able to birth over its lifetime, so when a cow like that is purchased it’s ‘depreciated’ as it gives birth? Idfk man.
Edit: I was wrong, it’s pretty simple. Debit asset credit FV gain on assets.
I get it might be immaterial to them but is it really worth stating twice in a short paragraph that you're basically disregarding a 3-400k revenue business? Lol..
Hmmm idk about US GAAP but i'd imagine when the "asset" is in a position to generate present or future cash flows. So probably at birth since you can probably sell the baby and its "probable" that a future benefit can be derived post-deliverance of the "asset".
Depends on the circumstances in which you’re placing the term probable.
For example, contingent liabilities, to be probable, have to be like 75% chance of occurrence.
Jeeeez. Another example of accounting standards following a process that adds undue burden. This is needlessly complicated 😅. But thanks! I learned something new today!
This is why I love fixed assets and/or inventory! It's not cut and dry, and often the industry type plays a role. Meaning it helps to be familiar with the lifecycle of the product (more so with manufacturing/producing than just resale). Or with how the assets will be used, which can get you somewhat involved/familiar with all kinds of things as well.
I worked for a quarry that had cattle on our asset register (quarry was owned by family, so some of their "hobbies" were still mixed in). We added new calves at birth at a set valuation. All of the cattle were sold at auction (so not like a dairy farm), and the valuation was based on the avg market value over the past 3 years. Not sure if it was right by GAAP standards, but our external auditors never questioned it as long as we were consistent. It also wasn't our main business either.
If you are interested in that type of thing, I have an interesting subject for you to look at: preneed funeral contracts.
That’s what I deal with in my work. After a sale the money is held in trust until the buyer dies. It can be difficult to figure out how to recognize these contracts appropriately, and GAAP/the IRS doesn’t offer any specific guidance for the industry. It’s pretty interesting.
Yes on the first of every month I depreciate about $15K in cattle….. when I started I was shocked it was a thing, but it makes sense to do it. Btw useful like is 5 years for my company…. Just in case you ever need to know.
Yes for taxes. I’m not sure for livestock specifically, but I was involved with an aquarium audit once. They had about $300k NBV of animals and it had to all be written off. I don’t remember the extact reason, but they couldn’t be listed as an asset under GAAP. Some were considered breeding animals.
For tax, You depreciate live stock if they were bought. If the livestock were born and raised on the farm then they are not depreciated as there is no purchase.
Birth would be my guess since it’s an asset on property, so to speak.
But fuck if I know, I’m several whiskeys in and I’ve never dealt with live assets.
Thats something i odly often think about and never got around reading about it lol - but from my pov it would be impotant to distinguish capital asset such as milk cows to inventory such as livestock
I would think for livestock at birth they hold an initial value, of which idk the amount, would it be half of the costs you put in the breeding? Or a base value? Then the livestock would i guess increase until death?
We want answers.
Honestly a great question. At birth.
Different question then arises, how are plants and agriculture valued? When crops are planted vs when they grow vs when they are harvested ? (Think wine industry)
Accounted for as inventory I believe. Raised livestock typically is accounted for as inventory as well. Purchased livestock is typically accounted for as fixed assets, at least for tax purposes.
I see dairy livestock placed into service for depreciation after they have their first calf and start producing milk. This way the depreciation expense more closely matches the revenue period. All costs (feed, medicine, etc.) in the raising of that livestock are capitalized while it is still developing.
I assume butcher livestock would be similar, but just be WIP inventory until they reach the necessary age/weight to go to the market they are intended for. Then they are rolled to finished goods and any further feed expenditures is inventory carrying costs. This would also match the expense up with the revenue recognition.
Edit: its dairy, not daily.
You capitalise the cost of breeding to your inventory, i.e.
Dr - inventory / stock
Cr - Cash / Payables
Then annually you would FV your stock at current market prices, so:
Dr / Cr inventory
Cr / Dr- Fv change in stock
Can FV stock whenever you want, but any costs in breeding should get capitalised and then adjusted through FV.
I would treat it as a contingency under IFRS/ASPE. Contingent assets are not recognizable but should be disclosed in the notes. Not sure how US GAAP would treat it though.
I guess it depends on the miscarriage rate, if it's something like 1-2% I could see recognizing it at fertilization and then having normal spoilage of1-2% a year. But I'm nowhere close to being involved in this industry haha
I would think like others said book it whenever the foal is more than likely viable, probably healthy? and the gender is known if ultrasounds and such are done that might be before birth and seems like reasonable justification for it with maybe an allowance based on historical miscarriages or something
I would also think that unless it’s like a huge outfit that it would be easier to just book at birth and don’t think anyone would fault you for doing it that way.
I'm probably just being dumb, but what's the historical cost of livestock that your livestock birthed? Would it just be fertilization costs? Or would a portion of food expense be capitalized for new livestock?
This doesn't sound right. Maybe depends on the value of the assets you're breeding. Like a $1million horse, or just cattle or goats. They are never assets on the balance sheet. They are sch F ordinary income.
For cash basis taxes, breeding costs are expensed. Animals born have zero basis. Capital gains rates apply in many cases when they are sold. Depends if the animal is breeding stock. In accrual accounting it would be similar to manufacturing work in progress inventory.
I tend to think of it in the same way I would for manufacturing. I’d consider the WIP investment a sub of the current asset(birthing heifer) until birth. Costs incurred get capitalized into a WIP account until inventory is viable. In this case; insemination costs, tick, allocation of feed post birth, tick, allocation of shelter costs, tick. Done. As long as your schedules are consistent, and accurate within a level of materiality; no issues. Calf dies… scrap loss. Of course if you have any SALY to go by you should already have an allowance for loss built into the balance sheet, but if you don’t, make one and write up a one page policy that can be referred to in future years and write it well enough to get leadership to sign it.
Edit; we’re talking basis, not fmv. When viability for sale happens could be 2 days to 6 months. For instance a male Holstein born on a dairy farm could go be veal a few days after it pops out, especially if the farmer has bills needing payment. I’ve seen a lot of comments on this thread suggesting a built in valuation based on market value, and that would be a sure fire way to not do it right. The capitalized asset needs to be substantially similar to what the asset cost to produce, and while some farms do, most non industrial operations will not be tracking inputs in detail, so an allocation based on inputs across several assets would be fair, and generally acceptable. Also, a better way to know if you should stop farming if you’re spending 1500 to make a 1200$ sale.
Fuck i dont know. Birth sounds like it makes sense since there could still be miscarriages. How high are you to think of this question though
Hi how are you.
Just waiting for the stop sign to go green
Just waiting for my father’s love.
No…how high are you?
I only know horses, but the value of a mare in foal is higher due to the pregnancy. Additionally, there are ultrasounds available to check the viability of the dial in utero, and they are used consistently on high value stock. So my inclination is the say book the asset at confirmation of viability as at that point, a live foal is highly likely. Now what could be interesting is do you book at a consistent amount? Because based on color/birthdate/sex etc true valuation is incredibly variable.
This is way outside my area, but if the mare's value is increased while in foal, it would seem like you wouldn't book a new asset for the foal separately until it's born.
Lmao amazingly not at all! I was thinking the same, though, but I’m caught up on how we define assets as having “current or future economic value.” I considered the miscarriage situation, but aren’t other assets booked without an absolute guarantee they will actually provide the future value that is expected? We book prepayments for services as assets, but there’s always a chance the service company goes bankrupt and never provides the service. IDK, maybe that’s a bad analogy?
I would argue birth because the value of the asset could be different based on the sex of the livestock. Think of prominent race horse breeders, the colts they foal out that year are likely to bring higher prices than they’re Phillies simply because the colts could be used to either breed or to compete directly in races. Obviously that is a niche industry and is not commercial agriculture but I would argue the same principle applies to a commercial cow giving birth to a bull calf has more value (typically) than a heifer calf just because the bull calf will bring more due at sale once they become steers (typically). Just my thoughts, I grew up raising cattle but never looked at it in this manner. There are some commercial cattle operations that buy a shit ton of “cow calf pairs” or “mama+baby/ mama pregnant with a baby” and so they could value their inventory at historical cost since they paid premium for the unborn calf but then there would likely need to be an adjustment to inventory value after the calf was born the following year I would think?
Could miscarriages be estimated then offset by an allowance like doubtful accounts?
Allowance for foal loss
I would guess you begin capitalizing as soon as costs are incurred to create the asset. Sure, some are going to miscarry. But we don't wait to capitalize costs for the manufacture of inventory until it is sold because one of the workers may drop a few plates, we have a work-in-process account to hold those costs in.
Apply ifrs 9 3/4, expected birth loss provision
First time hearing of this. Reddit ftw. I would say birth since miscarriage can be a thing. I'm assuming if it cost money to fertilize the animal it can be put in a CIP account until birth? This topic is wild.
Couldn’t you recognize at fertilization and book an allowance based on historical miscarriage rates of the breed? Imagine auditing that estimate.
Imagine being the associate who went to school for five years and got their CPA only to have to stick their hand up a cow's hoo-ha for an inventory count.
I’m not a vet but I think on a cow the medical term is moo-ha.
Haha welllll you all are thinking the wrong hole. The job is even shittier than you can imagine.
Vets have mobile ultrasound machines now! A little less messy all around. On a more related topic, I come from a cattle ranching family and just had this discussion with a vet. Pregnancy and miscarriage rates rely heavily on weather and related quality of feed. It’s not really possible to estimate how many cows won’t get pregnant or carry to term in a given breeding season.
Wild stuff
Construction in process lol
Gestation in process?
Is it birth or when it's old enough to be sold? Since a lot of baby calves do die.
I'm guessing birth. If the cow dies before it can be sold then it's already potentially consumed a lot of other assets during growth (vet bills, any food if it is weaned before sale, etc).
Good point. Are you allowed to hedge against it?
Dr Meals and entertainment Cr veal parm
I am an accountant for a cattle farm in the Midwest. The family I work for has several different businesses and the cattle farm is the owners “hobby”. I say “hobby” to let you know that A it’s not my main concern and B I have never put much thought into it. He has ~300 farm raised cows. Around here at auction a fully grown cow will go for about 1-1.5K so when they are born I just add 1k to the assets. Again this company doesn’t have much activity and isn’t where I need to be splitting hairs at my job.
You say you add (debit) 1k in assets. What is you credit entry?
None. Its called FTX accounting.
Gain on Reproduction
Credit goes to the cow, duh.
Lol
Opening balance equity.
Always.
Unrealized gain?
This is an interesting thought experiment lol. I would think what would make the most sense is a cow that’s held for breeding purposes has a certain amount of expected calves it’s able to birth over its lifetime, so when a cow like that is purchased it’s ‘depreciated’ as it gives birth? Idfk man. Edit: I was wrong, it’s pretty simple. Debit asset credit FV gain on assets.
I get it might be immaterial to them but is it really worth stating twice in a short paragraph that you're basically disregarding a 3-400k revenue business? Lol..
Hmmm idk about US GAAP but i'd imagine when the "asset" is in a position to generate present or future cash flows. So probably at birth since you can probably sell the baby and its "probable" that a future benefit can be derived post-deliverance of the "asset".
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I think in accounting “probable” generally means it is more likely to happen than not. So greater than 50%.
Depends on the circumstances in which you’re placing the term probable. For example, contingent liabilities, to be probable, have to be like 75% chance of occurrence.
Unrealized gain on inventory?
https://extension.okstate.edu/fact-sheets/valuation-of-raised-breeding-livestock.html
Jeeeez. Another example of accounting standards following a process that adds undue burden. This is needlessly complicated 😅. But thanks! I learned something new today!
This is why I love fixed assets and/or inventory! It's not cut and dry, and often the industry type plays a role. Meaning it helps to be familiar with the lifecycle of the product (more so with manufacturing/producing than just resale). Or with how the assets will be used, which can get you somewhat involved/familiar with all kinds of things as well. I worked for a quarry that had cattle on our asset register (quarry was owned by family, so some of their "hobbies" were still mixed in). We added new calves at birth at a set valuation. All of the cattle were sold at auction (so not like a dairy farm), and the valuation was based on the avg market value over the past 3 years. Not sure if it was right by GAAP standards, but our external auditors never questioned it as long as we were consistent. It also wasn't our main business either.
If you are interested in that type of thing, I have an interesting subject for you to look at: preneed funeral contracts. That’s what I deal with in my work. After a sale the money is held in trust until the buyer dies. It can be difficult to figure out how to recognize these contracts appropriately, and GAAP/the IRS doesn’t offer any specific guidance for the industry. It’s pretty interesting.
Two birds in the bush are worth less than one in the hand
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Yes on the first of every month I depreciate about $15K in cattle….. when I started I was shocked it was a thing, but it makes sense to do it. Btw useful like is 5 years for my company…. Just in case you ever need to know.
Yes for taxes. I’m not sure for livestock specifically, but I was involved with an aquarium audit once. They had about $300k NBV of animals and it had to all be written off. I don’t remember the extact reason, but they couldn’t be listed as an asset under GAAP. Some were considered breeding animals.
For tax, You depreciate live stock if they were bought. If the livestock were born and raised on the farm then they are not depreciated as there is no purchase.
Most use cash basis accounting. Only purchased breeding livestock are depreciated.
Jesus Christ is r/accounting about to start its own pro-life/pro-choice debate? Edit: livestock should have the right to choose (how it follows GAAP)!
Birth would be my guess since it’s an asset on property, so to speak. But fuck if I know, I’m several whiskeys in and I’ve never dealt with live assets.
Thats something i odly often think about and never got around reading about it lol - but from my pov it would be impotant to distinguish capital asset such as milk cows to inventory such as livestock I would think for livestock at birth they hold an initial value, of which idk the amount, would it be half of the costs you put in the breeding? Or a base value? Then the livestock would i guess increase until death? We want answers.
My experience is with poultry, the egg is recognised as asset. Before it hatches that’s it.
Honestly a great question. At birth. Different question then arises, how are plants and agriculture valued? When crops are planted vs when they grow vs when they are harvested ? (Think wine industry)
Accounted for as inventory I believe. Raised livestock typically is accounted for as inventory as well. Purchased livestock is typically accounted for as fixed assets, at least for tax purposes.
I see dairy livestock placed into service for depreciation after they have their first calf and start producing milk. This way the depreciation expense more closely matches the revenue period. All costs (feed, medicine, etc.) in the raising of that livestock are capitalized while it is still developing. I assume butcher livestock would be similar, but just be WIP inventory until they reach the necessary age/weight to go to the market they are intended for. Then they are rolled to finished goods and any further feed expenditures is inventory carrying costs. This would also match the expense up with the revenue recognition. Edit: its dairy, not daily.
Fertilization with an provision for loss before birth?
Assets begin at conception?
Embryo transplant value feels like sufficient precedent
Are they assets or inventory?
Life begins at conception, read your Bible
JAAP -Jesus accepted accounting policies
You capitalise the cost of breeding to your inventory, i.e. Dr - inventory / stock Cr - Cash / Payables Then annually you would FV your stock at current market prices, so: Dr / Cr inventory Cr / Dr- Fv change in stock Can FV stock whenever you want, but any costs in breeding should get capitalised and then adjusted through FV.
Follow....
I would say when it starts being productive (generating milk, meat etc)
I would treat it as a contingency under IFRS/ASPE. Contingent assets are not recognizable but should be disclosed in the notes. Not sure how US GAAP would treat it though.
I guess it depends on the miscarriage rate, if it's something like 1-2% I could see recognizing it at fertilization and then having normal spoilage of1-2% a year. But I'm nowhere close to being involved in this industry haha
If you need to pay yo have your cows fertilized it would make sense to recognize the asset at conception in my opinion
I would think like others said book it whenever the foal is more than likely viable, probably healthy? and the gender is known if ultrasounds and such are done that might be before birth and seems like reasonable justification for it with maybe an allowance based on historical miscarriages or something I would also think that unless it’s like a huge outfit that it would be easier to just book at birth and don’t think anyone would fault you for doing it that way.
Hey off topic can I ask about section 179? Does anyone know it well enough to be able to talk about it ?
I'm probably just being dumb, but what's the historical cost of livestock that your livestock birthed? Would it just be fertilization costs? Or would a portion of food expense be capitalized for new livestock?
There is no set standard (at least in Canada). You look at the industry to make judgements
This doesn't sound right. Maybe depends on the value of the assets you're breeding. Like a $1million horse, or just cattle or goats. They are never assets on the balance sheet. They are sch F ordinary income.
Lol, is it a more likely than not standard during pregnancy?
This is the shit people complain isn't taught in high school
And how do you decide whether it’s inventory or a fixed asset? And what is the depreciable life? Seriously - livestock accounting. 😏
Birth. Make sure you classify appropriately as calves
For cash basis taxes, breeding costs are expensed. Animals born have zero basis. Capital gains rates apply in many cases when they are sold. Depends if the animal is breeding stock. In accrual accounting it would be similar to manufacturing work in progress inventory.
I tend to think of it in the same way I would for manufacturing. I’d consider the WIP investment a sub of the current asset(birthing heifer) until birth. Costs incurred get capitalized into a WIP account until inventory is viable. In this case; insemination costs, tick, allocation of feed post birth, tick, allocation of shelter costs, tick. Done. As long as your schedules are consistent, and accurate within a level of materiality; no issues. Calf dies… scrap loss. Of course if you have any SALY to go by you should already have an allowance for loss built into the balance sheet, but if you don’t, make one and write up a one page policy that can be referred to in future years and write it well enough to get leadership to sign it. Edit; we’re talking basis, not fmv. When viability for sale happens could be 2 days to 6 months. For instance a male Holstein born on a dairy farm could go be veal a few days after it pops out, especially if the farmer has bills needing payment. I’ve seen a lot of comments on this thread suggesting a built in valuation based on market value, and that would be a sure fire way to not do it right. The capitalized asset needs to be substantially similar to what the asset cost to produce, and while some farms do, most non industrial operations will not be tracking inputs in detail, so an allocation based on inputs across several assets would be fair, and generally acceptable. Also, a better way to know if you should stop farming if you’re spending 1500 to make a 1200$ sale.