AGRICULTURE (PAS
41)
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 asset.
• Examples: Raising Livestock, forestry, annual or perennial cropping,
cultivating orchards and plantations, floriculture and aquaculture.
THREE CRITERIA TO QUALIFY UNDER PAS 41
• CM^2
• Capability to change – capable of biological transformation
• Management of change – facilitates the biological transformation
• Measurement of change – to change in quality or quantity
BIOLOGICAL TRANSFORMATION
• Comprises growth, degeneration, production, and procreation that
cause qualitative or quantitative changes in a biological asset.
• Growth – increase in quantity or improvement of the quality of an
animal or plant (Age)
• Degeneration – decrease in quantity or deterioration in quality of an
animal or plant
• Procreation – creation of additional living animals or plants
• Production of agricultural produce
NOT CONSIDERED AS AGRICULTURAL
ACTIVITY
• Managing of animals related to recreational activities (Ex. Zoo)
• Ocean Fishing Activity
BIOLOGICAL ASSETS VS. AGRICULTURAL PRODUCE
PAS 41 PAS 41 PAS 2
ITEMS OUT OF SCOPE OF PAS 41, AGRICULTURE
BEARER PLANT VS. BEARER ANIMALS
Criteria Bearer Plants Bearer Animals
A living plant used in the Biological assets (typically
production/supply of agricultural livestock) that are used
Definition produce for more than one period, repeatedly or continuously in
and is not intended to be sold as a the production of agricultural
living plant. produce.
Classified under PAS 16 – Property, Accounted for under PAS 41
Relevant Standards
Plant & Equipment – Agriculture
- Rubber trees
- Dairy cattle
- Oil palm trees
Examples - Breeding pigs
- Grape vines
- Layer hens
- Apple trees
BEARER PLANT VS. BEARER ANIMALS
Accounted for as biological
Accounted for as PPE: assets:
Accounting - Measured initially at cost - Measured at fair value
Treatment - Depreciated over useful life less costs to sell (FV-LCTS),
- Subject to impairment testing unless fair value cannot be
measured reliably
Produce (e.g., milk, eggs,
Agricultural produce (e.g., fruits,
wool) is treated as
Produce Grown latex) is biological asset under PAS
agricultural produce under
41
PAS 41
RECOGNITION
• Entity controls the asset
• It is probable that future economic benefit will flow to the entity
• The fair value or cost can be measured reliably
MEASUREMENT
• Initial measurement and Subsequent measurement:
• Fair Value less cost to sell.
• If not available on initial recognition, measured at Cost less Accumulated
depreciation and any Accumulated Impairment Loss
• Once FV can be reliably measured, an entity shall use the Fair Value
less cost to sell measurement.
AGRICULTURAL PRODUCE MEASUREMENT
• At the point of harvest:
• Fair Value less cost to sell
• The standard presumes that the FV of agricultural produce can always
be measured reliably.
DETERMINING IMPLIED FAIR VALUE OF BIOLOGICAL ASSETS
Biological assets are often physically attached to land (for example, trees in a plantation forest). An
entity may use information regarding the combined assets to measure the fair value of the
biological assets. For example, the fair value of raw land and land improvements may be
deducted from the fair value of the combined assets to arrive at the fair value of biological
assets.
GAIN OR LOSS ON BIOLOGICAL ASSET AND
AGRICULTURAL PRODUCE
• At initial recognition:
• *If the Cost to Sell > Fair Value = Loss
• If there is a newborn animal recognized a Gain
• For Agricultural produce if there is a harvest, recognized G/L
• At subsequent recognition:
• Increases in FVCS are recorded as unrealized gains while decreases are recorded as unrealized losses
• G/L from changes in FVCS resulting from Physical Changes
• G/L from changes in FVCS resulting from Price Changes
*Loss may arise on Initial Recognition
PHYSICAL AND PRICE CHANGES
• Physical Change – changes in physical characteristic arising from
biological transformation.
PRICE CHANGE
• Changes in market prices without regard to changes in physical
attributes.
Price at January 1 vs. Price at December 31 Price at January 1 vs. Price at December 31
AGRICULTURAL PRODUCE
Agricultural produce harvested from an entity's biological assets shall bemeasured
at its FVLCTS at the point of harvest.
As a result of harvesting, gain or loss arising on initial recognition of
agricultural produce at FVLCTS shall be included in profit or loss for the period
in which it arises.
GOVERNMENT GRANT RELATING TO PAS 41
• Measurement:
• Fair Value less Cost to Sell in P/L
• If measured at Cost less Acc Dep, PAS 20 (Accounting for Government
Grant) will apply.
• Recognition:
• Unconditional
• Recognized when the grant becomes receivable
• Conditional
• Recognized if the conditions are met
PRESENTATION
• Statement of Financial Position
• Current Asset section
• Biological Asset that would include produce to be harvested within 12 months of
reporting period
• Non Current Asset section
• Normal presentation
• Line item “Biological Asset”
• Excluding Bearer Plant (PAS 16)
DISCLOSURE
• General Requirements
• 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.
• An entity shall provide a description of each group of biological assets.
ADDITIONAL DISCLOSURES
• Measurement Bases for Fair Values
• Whether an independent appraiser was utilized
• Discount Rate used to compute Present Value
• Additional details about the changes in Fair Value from prior period
• Any restrictions on title, and any pledging of biological asset
• Commitments for further development
• Specifics about risk management
• Activities which are unsustainable, along with estimated dates of cessation of those
activities
