Raised 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 Raised Breeding Livestock?
Raised breeding livestock refers to animals specifically bred and reared for reproductive purposes on a farm. These animals are not primarily intended for immediate sale or slaughter for meat, milk, or other products.
Instead, their primary value lies in their ability to produce offspring, which can then be used for various agricultural purposes. Raised breeding livestock includes animals like cows, bulls, sows, boars, ewes, rams, hens, and roosters, among others.
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. This is different than purchased breeding livestock, which are bought as opposed to raise. This brings about one of the key differences in how the two are valued on the balance sheet. See below to learn more.
Types of Raised Breeding Livestock
Raised breeding livestock can really include any type of animal that is raised 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.
Raised Breeding Livestock is separate from Purchased Breeding Livestock due to differences in valuation on the balance sheet.
Raised Breeding Livestock on the Balance Sheet
Raised 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 raised breeding livestock should be reflected as a long-term asset.
Purpose of Raised 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 Raised Breeding Livestock on Balance Sheet
Valuing raised breeding livestock differs from purchased assets as the costs are spread over time. While tax deductions are immediate, for financial reporting, a consistent method like base-value or full-cost absorption is needed. The base-value method, though simpler, is often preferred for its cost-effectiveness and suitability for decision-making. It’s crucial to remain conservative and consistent with valuation methods to avoid overestimating asset values.
Base Value Method for Valuing Raised Breeding Livestock
Simply put, the base value method for valuing raised breeding livestock is the total cost of raising an animal to its current condition. The full value of that single animal would then be added to the Raised Breeding Livestock account on the balance sheet.
For example, let’s assume that it costs a dairy producer $1200 to feed and care for a calf to maturity to produce milk. This $1200 amount would be the base value of that heifer which is then recorded on the balance sheet.
Base Value Method: Group Value Approach
However, many agriculture operations have many animals owned and it is not practical to assign values to each animal individually. This is where the group-value based approach will come into play. Under the group-value approach, breeding animals are given base values when the balance sheet is made. These values change at specific times, called transfer points, like when an animal moves to a new stage. Producers need to pick transfer points consistently, like calf, replacement heifer, bred heifer, and cow. The producer might set a base value for the cost of getting a live birth, or list young animals as marketable until they’re picked for breeding. A base value for each stage’s costs helps measure cost increases, adjusting income and retained earnings. Transfer points could be based on age or a single event, like when an animal starts working.
For example, if it costs $10,000 to raise a group of 10 calves from birth to replacement heifer, the entire group is assigned that value instead of breaking down the valuation at $1000 per animal.
Depreciation Under the Base Value Method
Under the base value method, raised breeding livestock is not depreciated on the balance sheet. Instead, the cost of raising the livestock is recorded on the income statement as an expense.
Full Cost Absorption Method for Valuing Raised Breeding Livestock
The full cost absorption method is used to understand how much it costs to raise breeding livestock. This method involves adding up all costs associated with raising an animal to the point that it is productive, including both direct costs and indirect costs.
Under the full cost absorption method. these costs are then capitalized, as opposed to expensed.
Depreciation Under the Full Cost Absorption Value Method
The capitalized values are depreciated once the animal enters the breeding stock, becoming part of the breeding herd or flock. The undepreciated costs represent the cost of the animal for the cost-basis balance sheet.
Exclusions from Raised Breeding Livestock on the Balance Sheet
Proper accounting and valuation of raised 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.
- Purchased Breeding Livestock: Due to the differences in how purchased livestock is handled versus breeding livestock, no purchased breeding livestock should be misclassified. Rather, any animal purchased for breeding purposes should be classified under purchased 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.