Page 321 - Agriculture_Form_Three

Agriculture for Secondary Schools

(f) Valuation at cost less depreciation charges
This method is used mainly for valuing long-term capital farm assets such as
machineries, equipment and buildings.

General rules to consider in valuing farm assets
The following are general rules to consider in valuating farm assets:
(a) Land does not deteriorate under good management practices; it keeps the same

value or appreciate. It may even become much more valuable with time. The
value taken is the prevailing market price or the estimated market (purchase)
price based on the value of similar land in the area at the time.

(b) Buildings of stone or brick may last 25 - 40 years. Therefore, depreciation is
between 2.5% and 4% per year. Wooden buildings depreciate by about 10% per
year.

(c) Motorised machinery, for example, tractors, harvesters and pumps depreciate
at 20% per year or more depending primarily on the level of maintenance and
number of hours which they operate.

(d) Non-motorised machinery, for example, ploughs, harrows and carts depreciate
at about 10% per year.

(e) Small tools such as hammer, plier, shovel, hoe and bucket are often written
off immediately at purchase which means that their depreciation is 100% per
year. However, we might have new and some nearly worn-out small tools.
Therefore, the suitable method is to calculate the new value of all small tools
and to record them on the inventory. However, under village condition, farmers

may continue to use a tool/implement beyond its working life.
(f) For livestock, during an initial period, the value of newly born farm animals
increases, then the value remains constant and finally it decreases. In this last
period, the animals are usually sold. Therefore, calculation of the depreciation
of domestic animals is meaningless. Instead, livestock is listed by kind, age
and sex. For example, in a dairy herd, there are bulls, dairy cows, heifers over

2 years, heifers of 1 - 2 years and calves under 1 year. Each group of animals
is valued by multiplying the number in that group by a fixed price. Ideally, this
fixed price would be the cost of breeding a representative animal of that group.
Purchased mature cattle are valued at the respective prevailing purchase or
market price.

Student’s Book Form Three
310

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AGRICULTURE FORM 3 9.11.2022.indd 310