Indeed, planting fruit trees or bearer trees, such as mango, orange, banana, pine, or timber trees, are considered assets that require valuation when selling a house. Even on traditional land, developing a habit of planting trees is advisable, and if the government decides to resettle you, possibly to build a school in that area, the compensation fees will be higher for those with trees compared to those with bare land.
In life, it is essential to have both an accountant and a lawyer, as these professionals can help you generate income from unexpected sources. Lack of knowledge or guidance, make some individuals to sell houses with numerous bearer plants without considering their value.
In accounting, if you have trees on your property or farm that are expected to bear fruit for more than one period, and their primary purpose is not for sale as plants themselves, then they are considered bearer plants that produce agricultural produce. Such plants should be classified as assets and listed on the statement of financial position as biological assets.
According to accounting standards IAS 41 Agriculture, biological assets are generally measured at fair value less costs to sell. This means that the value of a mango tree is assessed based on its current market value, taking into account any costs associated with selling it. So you must know how much a mango tree should be sold. A mango tree would be recognized as a biological asset when the entity controls the asset due to past events, future economic benefits are probable, and the entity can reliably measure the fair value of the asset. In other ways, we mean, the reason for planting such trees is to harvest fruits, the tree is in under your control and you can tell how much one tree can be sold. Don’t worry about the price of your trees, there are experts in that area.
What this means is that, when you are selling your farm and as you list the value of the house, let us say, K1 million, you should also list the value of such plants k400,000. The fair value of trees should be added to the price of the house. IAS 41 also applies where you have cows used for milk that can be classified as biological assets in the statement of financial position.
IAS 41 (Agriculture), specifically dairy cows (used for milk production) and cattle raised for meat are considered biological assets. These assets are subject to fair value accounting, meaning their value is regularly adjusted to reflect changes in market conditions.
So, if you have a house, mango or banana trees, and cows, I expect your statement of financial position to have a house, trees, and cows as assets. Doing so will increase the value of your farm.
By; Winfred Mupakasi Silumbwe
