Agricultural Accounting
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“While the agriculturist would continue
sloughing, his accountant would be busy
in measuring all biological assets at fair
value less expected point-of-sale costs
at each balance sheet date.''
RORI A. M
Cont....ed
According to Standard,
accounting for agricultural
activity specifically covering:
◦Biological assets
◦Agricultural produce at the
point of harvest
◦Related government grants
◦Excludes land and intangible
assets
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Basic terminologies in agricultural accounting
Agricultural Activity –the biological transformation of biological assets
for sale into agricultural produce or into additional biological assets
Agricultural Produce – the product of an enterprise’s biological assets
Biological Asset – A living animal or plant
Biological Transformation – the processes of growth, disintegration,
production and procreation that cause qualitative and quantitative
changes in a biological asset
Group of Biological Assets – An aggregation of similar living animals
or plants
Harvest – the detachment of produce from a biological asset/bearer
plant or the cessation of a biological asset’s life processes
Bearer plant
is used in the production or supply of agricultural produce;
is expected to bear produce for more than one period; and
has a remote likelihood of being sold as agricultural produce, except for incidental
scrap sales
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Examples of biological assets, agricultural produce,
and products that are the result of processing:
Biological Agricultural Products that are the result
Assets Produce of processing after harvest
Sheep Wool Yarn, carpet
Trees in a
plantation forest Logs Lumber
Cotton,
Plants harvested cane Thread, clothing, sugar
Dairy cattle Milk Cheese
Pigs Carcass Sausages, cured hams
Bushes Leaf Tea, cured tobacco
Vines Grapes Wine
Fruit trees Picked fruit Processed fruit
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Agricultural activity
• In general, agricultural activities have the following
common characteristics:
they are capable of biological transformation and this
transformation is managed, facilitated, measured, and
monitored by the entity
Agricultural Produce – the product of an enterprise’s
biological assets
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Agricultural activity
Biological Products that are the
Asset/Bearer Agricultural result of processing after
plant Produce harvest
Sheep Wool Yarn, carpet
Trees in a
plantation
forest Logs Lumber
Cotton,
Plants harvested cane Thread, clothing, sugar
Dairy cattle Milk Cheese
Pigs Carcass Sausages, cured hams
Bushes Leaf Tea, cured tobacco
Vines Grapes Wine
Fruit trees Picked fruit Processed fruit
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Examples: Bearer plant or
Biological asset?
1. Coffee plant
2. Crop plants (wheat, Maize, etc)
3. Sugar cane plant
4. grapevines
5. Bamboo plant
6. Rubber trees
7. Mango trees
8. Trees grown for lumber
9. Cows
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The ‘unit of account’
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Unit of account is the level at which an
asset or a liability is aggregated or
disaggregated for recognition purposes.
The Conceptual Framework is silent on
unit of account. Some standards specify
the unit of account for particular assets.
Others do not . Consequently, use
judgement informed by the information
needs of existing and potential investors,
lenders and other creditors for making
decisions about providing resources to the
reporting entity.
Examples-unit of account 10
How many separate items should a
beef farmer recognize for its cattle?
Choose one of:
1) herd as a whole
2) individual animals
How many separate items should a
honey farmer recognize for its bees?
Choose one of:
1) all 1,000 swarms collectively
2) each swarm
3) individual bees
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Recognition and measurement of agricultural produces
Biological assets/bearer plants may not be
recognised unless the following conditions are
met:
(a) the enterprise controls the asset as a result
of past events;
(b) it is probable that the future economic
benefits will flow to the enterprise; and
(c) the fair value or cost can be measured
reliably.
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Measurement at initial
recognition
Measurement Item
Historical cost Most inventory, PPE, intangibles and investment
property. Some non-produce part of bearer plants
(from 2016)
Fair value less Biological assets in agricultural activity:
costs to sell • All except non-produce part of bearer plants
(from 2016)
Fair value Any inventory, PPE, intangibles, investment
property etc. acquired in:
• a business combination; or
• exchanges of non-financial asset
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Measurement after initial recognition
Cost–based
Item
models
Historical Unimpaired inventory, unimpaired non-
cost depreciable PPE (alternative) and
unimpaired indefinite-life intangible assets
and goodwill; possibly the non-produce
part of some unimpaired bearer plants.
Historical Alternative for depreciable unimpaired
cost less PPE and most intangibles. Also non-
depreciation produce part of most bearer plants
(proportion
of cost
consumed
through use)
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Measurement after initial
recognition
Fair value–
based
Item
measureme
nts
Revaluation • Alternative for PPE, some intangibles
model and (from 2016) for the non-produce
part of some bearer plants
Thursday, March 6, 2025 AAUSC IFRS Project Office 14
Measurement after initial
recognition
Fair value–
based
Item
measureme
nts
Fair value • Biological assets in agricultural activity
less costs to (except non-produce part of bearer
sell plants); some non-current assets held
for sale; inventories of many
commodity broker traders; and
impaired PPE, goodwill, intangibles
etc (if recoverable amount not value in
use)
Thursday, March 6, 2025 AAUSC IFRS Project Office 15
Measurement after initial
recognition
Entity specific
Item
measurements
Net realizable Most impaired inventories and
value (expected • all inventories of some producers
selling price less of agricultural and forest products
costs to complete (an industry practice exception)
and sell)
Value in use Impaired PPE, goodwill and
(discounted intangibles (if recoverable amount
expected future not fair value less costs to sell).
cash flows)
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Measurement of biological assets at FV less
cost to sell
As biological assets grow and mature through biological
transformation, they increase in value
Biological assets are measured at fair value less estimated costs to
sell on initial recognition (and subsequently), unless fair value
cannot be reliably measured
◦ Costs to sell include commissions, taxes, and duties
The gain on initial recognition of biological assets at fair value less
costs to sell, and changes in fair value less costs to sell of biological
assets during a period, should be reported in arriving at net profit or
loss for the period.
The change in fair value of biological assets may be part physical
change (i.e. growth) and part price (i.e. fair value) change. IAS 41
encourages, but does not require, the separate disclosure of
these two components on the basis that it assists with appraising
current period performance and future prospects.
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Reporting and disclosure
requirements
The standard requires biological assets to be
presented separately on the statement
of financial position
The standard requires the following disclosures:
• Recognized gains/losses (on initial recognitions
and on revaluation)
• Description of each type of biological asset
• Nature of activities relating to the assets
• Non-financial measures or estimates of the
physical qualities of the assets
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Cont......ed
• Methods and significant assumptions to
determine fair value
• Fair value of harvested assets at point
of harvest
• Any restrictions on title
• Commitments for the development or
acquisition of biological assets
• Financial risk management strategies
• A reconciliation of changes in the
carrying amounts of biological assets
between the beginning and end of the period
• Additional disclosure if measured at
cost
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