Purchased Breeding Livestock on an agricultural balance sheet represents the value of any livestock raised for breeding purposes. This includes livestock such as cattle, sheep, pigs, goats, and poultry. It is noteworthy that this account on a balance sheet typically differs from Purchased Breeding Livestock
In This Section
- What is Purchased Breeding Livestock?
- Types and Examples of Purchased Breeding Livestock
- Purchased Breeding Livestock on the Balance Sheet
- Purpose of Purchased Breeding Livestock
- How to Record Purchased Breeding Livestock on Balance Sheet
- Exclusions from Purchased Breeding Livestock
- Frequently Asked Questions
What is Purchased Breeding Livestock?
Purchased breeding livestock refers to animals that are acquired by a farm or agricultural operation specifically for breeding purposes, but were not raised by that operation. Instead of being bred and raised on the farm itself, these animals are typically purchased from other breeders, auctions, or livestock markets.
Purchased breeding livestock are usually bought for the sole purpose of propagating and reproducing to create new offspring which will later be sold at market for meat, further breeding or for the production of livestock products.
It is noteworthy that this account on a balance sheet typically differs from Raised Breeding Livestock. While both are livestock accounts, it is important to distinguish between the two because of different methods of valuation (see below) as well as tracking the financial performance of those animals purchased as opposed to raised.
Types of Raised Breeding Livestock
Purchased breeding livestock can really include any type of animal that is bought for the purpose of procreating to create new animals.
The full list of animals is exhaustive/ However, the following are some of the common examples of breeding livestock one may find on the balance sheet:
- Cattle
- Hogs and Pigs
- Sheep
- Goats
- Poultry
Other examples may include alpacas, llamas, and other types of livestock raised for specialty purposes.
Purchased Breeding Livestock is separate from Raised Breeding Livestock due to differences in valuation on the balance sheet.
Purchased Breeding Livestock on the Balance Sheet
Purchased breeding livestock is typically held for the long-term, or greater than a year. Unless the animal is being actively sold as market livestock in the near term, the value of purchased breeding livestock should be reflected as a long-term asset.
Purpose of Purchased Breeding Livestock
Livestock holds immense importance for farmers and ranchers due to several key reasons.
Livestock serve as a significant source of income for farmers and ranchers through the sale of meat, milk, eggs, wool, hides, and other products. Livestock farming is often a primary or supplemental source of revenue for agricultural operations.
Livestock farming allows farmers to diversify their agricultural activities, spreading risk and stabilizing income streams. By raising different types of livestock, farmers can capitalize on market opportunities and mitigate the impact of fluctuations in commodity prices.
For any farmer or rancher that derives income from breeding livestock, these animals represents a substantial portion of a farm’s tangible assets. As such, a proper accounting of the value of these animals is crucial when preparing and analyzing financial statement.
How to Record Purchased Breeding Livestock on Balance Sheet
The total sum of the value of Purchased Breeding Livestock is often entered into the Purchased Breeding Livestock account on the balance sheet.
The key is in identifying the appropriate method to value the livestock. Here’s how you can value purchased breeding livestock:
Initial Purchase Cost
The initial purchase cost of the breeding livestock is the most straightforward method of valuation. This includes the actual purchase price paid for the animals, along with any additional costs associated with their acquisition, such as transportation fees or veterinary expenses incurred at the time of purchase.
Depreciation
Similar to raised breeding livestock, purchased breeding livestock may also be subject to depreciation over time. However, unlike assets such as machinery or equipment, the depreciation of livestock can be more subjective and may not follow a straight-line depreciation schedule. Factors such as age, productivity, and market demand should be considered when assessing the depreciation of breeding livestock.
Fair Market Value
If the fair market value of the purchased breeding livestock differs from the purchase cost, it should be adjusted accordingly. Fair market value represents the price that would be agreed upon between a willing buyer and a willing seller in an arm’s length transaction. Factors such as the age, breed, genetics, health status, and market demand for similar animals should be considered when determining fair market value.
Appraisal
In some cases, it may be necessary to obtain a professional appraisal to determine the fair market value of the purchased breeding livestock, especially if the animals possess unique or highly desirable traits that warrant a higher valuation.
Revaluation
Periodically reassessing the value of purchased breeding livestock may be necessary to reflect changes in market conditions, genetics, or other relevant factors. Revaluation allows for the adjustment of asset values to more accurately reflect their current worth on the balance sheet.
The valuation of purchased breeding livestock on a balance sheet requires careful consideration of factors such as initial purchase cost, fair market value, depreciation, and periodic revaluation to ensure accurate representation of the asset’s value and its contribution to the financial position of the agricultural operation.
Always make sure to contact a certified public accountant or attorney when assigning value to livestock on a balance sheet.
Exclusions from Purchased Breeding Livestock on the Balance Sheet
Proper accounting and valuation of purchased breeding livestock on the balance sheet is crucial for the preparer or user of farm financial statements. Due to the wide variety and purposes of animals, prepares should be cautious not to misclassify any asset which does not meet the definition of raised breeding livestock above.
Common exclusions from raised breeding livestock include:
-
Livestock Held for Sale: Animals that are raised specifically for sale as meat, dairy, or other products, rather than for breeding purposes, may be classified differently on the balance sheet. These animals are typically categorized as inventory or current assets rather than raised breeding livestock. These animals may rather be classified as market livestock.
- Raised Breeding Livestock: Due to the differences in how purchased livestock is handled versus breeding livestock, no raised breeding livestock should be misclassified. Rather, any animal purchased for breeding purposes should be classified under Raised Breeding Livestock instead.
Frequently Asked Questions
What is the Difference Between Raised Breeding Livestock and Purchased Breeding Livestock?
Raised breeding livestock and purchased breeding livestock may be similar in that these are both categories or types of animals utilized for the purpose of breeding. The difference between raised and purchased breeding livestock lies in how they are acquired by the farm and their stage of development when they enter the farm’s operations.
Raised breeding livestock are born and raised on the farm itself or obtained at a very young age, typically as newborns or shortly after birth. These animals are usually valued at the total expenses incurred raising the animal.
On the other hand, purchased breeding livestock are acquired from external sources such as other farms, auctions, or specialized breeders.