Practice Activity 16.2 Differentiation of gains using the historical cost and fair value models

Using the historical cost and fair value models, differentiate the recognition of gain for a business enterprise that sells fruit juice to various customers and another business that is primarily involved in agricultural activity.

See the suggested answer to practice activity 16.2 here.

Suggested answer to practice activity 16.2

Based on historical cost model, a business enterprise that sells fruit juice to various customers recognises gain from revenue derived from sales.

Based on fair value model, a business that is involved in agricultural activity recognises gain as biological assets develop from when they are birth to life, grow, procreate and are harvested.