Mr. Bogan operates a dairy farm in Quebec. Recently, one of his cows gave birth to a female calf that will eventually join the dairy herd that produces the milk Mr. Bogan sells. When the calf was born, Mr. Bogan had the veterinarian check the calf. At first the calf drinks its mother's milk, but later it will graze on grass in the pasture. During the winter, the calf will eat hay that Mr. Bogan grows on another part of his farm. Eventually the calf will be a milk-producing cow.
a. According to IFRS, how would the calf (and then the producing cow) be valued on the farm's balance sheet?
b. According to ASPE, how would the calf (and then the producing cow) be valued on the farm's balance sheet?
c. Compare the two approaches. Which do you think provides more useful information to stakeholders? What are some of the problems with each of the methods?