Agriculture: Agriculture, Which Had Originally Been Issued by The International Accounting Standards

IAS 41
Agriculture
In April 2001 the International Accounting Standards Board (Board) adopted IAS 41
Agriculture, which had originally been issued by the International Accounting Standards
Committee in February 2001.
In December 2003 the Board issued a revised IAS 41 as part of its initial agenda of
technical projects.
In June 2014 the Board amended the scope of IAS 16 Property, Plant and Equipment to
include bearer plants related to agricultural activity. Bearer plants related to agricultural
activity were previously within the scope of IAS 41. However, IAS 41 applies to the
produce growing on those bearer plants.
Other Standards have made minor consequential amendments to IAS 41, including
IFRS 13 Fair Value Measurement (issued May 2011), IFRS 16 Leases (issued January 2016) and
Amendments to References to the Conceptual Framework in IFRS Standards (issued March 2018).
Agriculture-related 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.
The following are not bearer plants:
(a)
plants cultivated to be harvested as agricultural produce (for example,
trees grown for use as 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, other than as incidental scrap sales (for
example, trees that are cultivated both for their fruit and their
lumber); and
(c)
annual crops (for example, maize and wheat).
When bearer plants are no longer used to bear produce they might be cut
down and sold as scrap, for example, for use as firewood. Such incidental
scrap sales would not prevent the plant from satisfying the definition of a
bearer plant.
Produce growing on bearer plants is a biological asset.
Agricultural activity covers a diverse range of activities; for example, raising
livestock, forestry, annual or perennial cropping, cultivating orchards and
plantations, floriculture and aquaculture (including fish farming). Certain
common features exist within this diversity:
(a)
Capability to change. Living animals and plants are capable of biological
transformation;
(b)
Management of change. Management facilitates biological transformation
by enhancing, or at least stabilising, conditions necessary for the
process to take place (for example, nutrient levels, moisture,
temperature, fertility, and light). Such management distinguishes
agricultural activity from other activities. For example, harvesting
from unmanaged sources (such as ocean fishing and deforestation) is
not agricultural activity; and
(c)
Measurement of change. The change in quality (for example, genetic
merit, density, ripeness, fat cover, protein content, and fibre strength)
or quantity (for example, progeny, weight, cubic metres, fibre length
or diameter, and number of buds) brought about by biological
transformation or harvest is measured and monitored as a routine
management function.
Biological transformation results in the following types of outcomes:
(a)
asset changes through (i) growth (an increase in quantity or
improvement in quality of an animal or plant), (ii) degeneration (a
decrease in the quantity or deterioration in quality of an animal or
plant), or (iii) procreation (creation of additional living animals or
plants); or
(b)
production of agricultural produce such as latex, tea leaf, wool, and
milk.
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. (See IFRS 13 Fair Value Measurement.)
Government grants are as defined in IAS 20.
Recognition and measurement
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.
In agricultural activity, control may be evidenced by, for example, legal
ownership of cattle and the branding or otherwise marking of the cattle on
acquisition, birth, or weaning. The future benefits are normally assessed by
measuring the significant physical attributes.
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.
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.
Gains and losses

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.
A loss may arise on initial recognition of a biological asset, because costs to
sell are deducted in determining fair value less costs to sell of a biological
asset. A gain may arise on initial recognition of a biological asset, such as
when a calf is born.
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.
A gain or loss may arise on initial recognition of agricultural produce as a
result of harvesting.

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