The paper focuses on the possible ways of biological as-sets measurement in financial reporting of SMEs. Accord-ing to IFRS for SMEs, the entity uses the fair value model for biological assets with readily determinable fair values, and the cost model for all other biological assets. The na-ture of all kinds of biological assets differs significantly, especially that of bearer plants and living animals. The au-thors evaluated the application of the above-mentioned methods to the representatives of both kinds of biological assets (an apple orchard and dairy cows). According to the study the way of biological assets measurement af-fects the financial position and performance of SMEs in-volved in the agricultural sector. The cost model is a more suitable way of measurement for bearer plants reporting, while the fair value measurement is more suitable for living animals in respect to fundamental principles of financial reporting.