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NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2013
78 INDOFOOD AGRI RESOURCES LTD • ANNUAL REPORT 2013
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.8 Biological assets
Biological assets, which primarily comprise of oil palm, rubber and sugar cane plantations are stated at fair value less estimated
point-of-sale costs. Gain or loss arising on initial recognition of plantations at fair value less estimated point-of-sale costs and from
the change in fair value less estimated point-of-sale costs of plantations at each reporting date are included in the consolidated
statement of comprehensive income of the period in which they arise.
The fair value of the plantations is estimated by reference to independent professional valuations using the discounted cash flows
of the underlying biological assets, mainly oil palm, rubber and sugar cane. The expected cash flows from the whole life cycle of
the oil palm, rubber and sugar cane plantations are determined using the market prices of the estimated yields of the fresh fruit
bunches (“FFB”), cup lump and sugar cane, respectively, net of maintenance and harvesting costs, and any costs required to
bring the oil palm, rubber, and sugar cane plantations to maturity. The estimated yields of the oil palm, rubber and sugar cane
plantations are dependent on the age of the oil palm, rubber and sugar cane trees, the location of the plantations, soil type and
infrastructure. The market prices of the FFB, rubber and sugar cane are largely dependent on the prevailing market prices of the
crude palm oil and palm kernel oil, RSS1 and other rubber products of the Group, and sugar respectively.
Oil palm trees have an average life that ranges from 20 to 25 years; with the first 3 to 4 years as immature and the remaining
years as mature.
Rubber trees have an average life that ranges from 20 to 25 years with first 5 to 6 years as immature and the remaining years
as mature.
Sugar cane is ready for harvest in 12 months and can be harvested for an average of 4 years.
2.9 Plasma receivables
Plasma receivables represent the accumulated costs to develop plasma plantations which are currently being financed by banks
and self-financed by certain subsidiaries. Upon obtaining financing from the bank, the said advances will be offset against the
corresponding funds received from rural cooperatives unit (Koperasi Unit Desa or the “KUD”). For certain plasma plantations,
the loans obtained from the bank are under the related subsidiaries’ (acting as nucleus companies) credit facility. When the
development of plasma plantation is substantially completed and ready to be transferred or handed-over to plasma farmers, the
corresponding investment credit from the bank is also transferred to the plasma farmers.
Gain or loss resulting from the difference between the carrying value of the plasma receivables and the corresponding investment
credit transferred to the plasma farmers is reflected in the consolidated statement of comprehensive income for the year.
An allowance for uncollectible plasma receivables is also provided based on the excess of accumulated development costs over
the bank or Group’s funding or amounts agreed by the KUD.