IAS 41 | Agriculture

1

Scope

This Standard shall be applied to account for the following when they relate to agricultural activity: (a) biological assets, except for bearer plants; (b) agricultural produce at the point of harvest; and (c) government grants covered by paragraphs 34 and 35.

2

Exclusions

This Standard does not apply to: (a) land related to agricultural activity (IAS 16 and IAS 40); (b) bearer plants related to agricultural activity (IAS 16), though it applies to the produce on them; (c) government grants related to bearer plants (IAS 20); (d) intangible assets related to agricultural activity (IAS 38); and (e) right-of-use assets arising from a lease of land related to agricultural activity (IFRS 16).

3

Application to Produce

The Standard applies to agricultural produce at the point of harvest. Thereafter, IAS 2 Inventories or another applicable Standard is applied. It does not deal with processing after harvest (e.g., grapes into wine).

5

Definitions

The following terms are used in this Standard with the meanings specified:

• Agricultural activity is the management by an entity of the biological transformation and harvest of biological assets for sale or for conversion into agricultural produce or into additional biological assets.
• Agricultural produce is the harvested produce of the entity's biological assets.
• A bearer plant is a living plant that: (a) is used in the production or supply of agricultural produce; (b) is expected to bear produce for more than one period; and (c) has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.
• A biological asset is a living animal or plant.
• Biological transformation comprises the processes of growth, degeneration, production, and procreation that cause qualitative or quantitative changes in a biological asset.
• Costs to sell are the incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxes.
• A group of biological assets is an aggregation of similar living animals or plants.
• Harvest is the detachment of produce from a biological asset or the cessation of a biological asset's life processes.

5A

Bearer Plant Exclusions

The following are not bearer plants: (a) plants cultivated to be harvested as agricultural produce (e.g., trees for lumber); (b) plants cultivated to produce agricultural produce when there is more than a remote likelihood that the entity will also harvest and sell the plant as agricultural produce (e.g., trees for fruit and lumber); and (c) annual crops (e.g., maize and wheat).

5B

Scrap Sales

When bearer plants are no longer used to bear produce they might be cut down and sold as scrap. Such incidental scrap sales would not prevent the plant from satisfying the definition of a bearer plant.

5C

Produce on Bearer Plants

Produce growing on bearer plants is a biological asset.

6

Agricultural Activity Features

Common features of agricultural activity include: (a) Capability to change (living animals/plants are capable of transformation); (b) Management of change (enhancing or stabilising conditions like nutrient levels); and (c) Measurement of change (monitoring quality or quantity changes).

8

General Definitions

The following terms are used in this Standard with the meanings specified:

• Carrying amount is the amount at which an asset is recognised in the statement of financial position.
• Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
• Government grants are as defined in IAS 20.

10

Recognition

An entity shall recognise a biological asset or agricultural produce when, and only when: (a) the entity controls the asset as a result of past events; (b) it is probable that future economic benefits associated with the asset will flow to the entity; and (c) the fair value or cost of the asset can be measured reliably.

12

Biological Asset Measurement

A biological asset shall be measured on initial recognition and at the end of each reporting period at its fair value less costs to sell, except for the case described in paragraph 30 where the fair value cannot be measured reliably.

13

Produce Measurement

Agricultural produce harvested from an entity's biological assets shall be measured at its fair value less costs to sell at the point of harvest. Such measurement is the cost at that date when applying IAS 2 Inventories or another applicable Standard.

16

Contract Prices

Contract prices are not necessarily relevant in measuring fair value, because fair value reflects the current market conditions in which market participant buyers and sellers would enter into a transaction. Fair value is not adjusted for the existence of a contract.

22

Cash Flow Exclusions

An entity does not include any cash flows for financing the assets or re-establishing biological assets after harvest (e.g., replanting trees) when measuring fair value.

24

Cost Approximation

Cost may sometimes approximate fair value, particularly when: (a) little biological transformation has taken place since initial cost incurrence; or (b) the impact of biological transformation on price is not expected to be material.

25

Combined Assets

Biological assets are often attached to land. If no separate market exists for the biological assets, an entity may use information regarding the combined assets (assets, land, improvements) to measure the fair value of the biological assets (e.g., deducting fair value of land from the combined value).

26

Gains and Losses (Assets)

A gain or loss arising on initial recognition of a biological asset at fair value less costs to sell and from a change in fair value less costs to sell of a biological asset shall be included in profit or loss for the period in which it arises.

28

Gains and Losses (Produce)

A gain or loss arising on initial recognition of agricultural produce at fair value less costs to sell shall be included in profit or loss for the period in which it arises.

30

Measurement Exception

There is a presumption that fair value can be measured reliably. This can be rebutted only on initial recognition for a biological asset for which quoted market prices are not available and alternative fair value measurements are clearly unreliable. In such a case, the asset is measured at cost less accumulated depreciation and impairment.

32

Produce Exception

In all cases, an entity measures agricultural produce at the point of harvest at its fair value less costs to sell. The Standard reflects the view that fair value of produce at harvest can always be measured reliably.

34

Unconditional Grants

An unconditional government grant related to a biological asset measured at its fair value less costs to sell shall be recognised in profit or loss when, and only when, the government grant becomes receivable.

35

Conditional Grants

If a government grant related to a biological asset measured at its fair value less costs to sell is conditional, an entity shall recognise the government grant in profit or loss when, and only when, the conditions attaching to the government grant are met.

37

Grants at Cost

If a government grant relates to a biological asset measured at its cost less accumulated depreciation/impairment (per paragraph 30), IAS 20 is applied.

40

Disclosure

An entity shall disclose the aggregate gain or loss arising during the current period on initial recognition of biological assets and agricultural produce and from the change in fair value less costs to sell of biological assets.

41

Description

An entity shall provide a description of each group of biological assets.

43

Quantified Description

Entities are encouraged to provide a quantified description of each group, distinguishing between consumable and bearer biological assets or between mature and immature biological assets.

46

Activity Description

If not disclosed elsewhere, an entity shall describe: (a) the nature of its activities involving each group of biological assets; and (b) non-financial measures or estimates of the physical quantities of each group at the end of the period and output of produce during the period.

49

Specific Disclosures

An entity shall disclose: (a) the existence and carrying amounts of biological assets whose title is restricted/pledged; (b) commitments for development/acquisition; and (c) financial risk management strategies related to agricultural activity.

50

Reconciliation

An entity shall disclose a reconciliation of changes in the carrying amount of biological assets between the beginning and end of the period, showing: gains/losses from changes in fair value; purchases; sales; decreases due to harvest; increases from business combinations; exchange differences; and other changes.

54

Cost Model Disclosure

If biological assets are measured at cost (para 30), the entity shall disclose: description; explanation of why fair value cannot be measured; range of estimates; depreciation method; useful lives; and gross carrying amount/accumulated depreciation.

57

Grant Disclosure

An entity shall disclose the nature and extent of government grants recognised, unfulfilled conditions, and significant decreases expected in the level of grants.

58

Effective Date

The Standard becomes operative for annual financial statements covering periods beginning on or after 1 January 2003.