Agriculture

PAS 41

Prof. Danix de Pedro

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Scope
This Standard shall be applied to account for the following when they relate to agricultural activity:
 biological assets, except for bearer plants;
 agricultural produce at the point of harvest; and
 government grants biological asset measured at its FVLCTS.
This Standard does not apply to:
 land related to agricultural activity (see PAS 16 Property, Plant and Equipment and IAS 40 Investment
Property).
 bearer plants related to agricultural activity (see PAS 16). However, this Standard applies to the produce
on those bearer plants.
 government grants related to bearer plants (see PAS 20 Accounting for Government Grants and
Disclosure of Government Assistance).
 intangible assets related to agricultural activity (see PAS 38 Intangible Assets).
PAS 41 applies to agricultural at the point of harvest. After the harvest, PAS 2-Inventories or other applicable
standard is applied.

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Bearing Plant
A bearer plant is a living plant that:
 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.

The following are not bearer plants:

 plants cultivated to be harvested as agricultural produce (for example, trees grown for use as
lumber);
 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
 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.

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Bearing Plant
Bearer plants that may be sold as a scrap when no longer used are not necessarily precluded from
being classified as bearer plants.

Items Applicable Standard

Bearer and Consumable PAS 41
Consumable Plants PAS 41
Bearer Plants PAS 16
Produce growing on bearer plants PAS 41

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Biological Asset
Biological asset is a living animal or plant.

A group of biological assets is an aggregation of similar living animals or plants.

Consumable biological assets

 Those items that are to be harvested as agricultural produce or sold as biological assets.
Example”
1. Live stock intended for production of meat
2. Livestock held for sale
3. Fish in farms
4. Crops such as maize and wheat
5. Produce on a bearer plant
6. Trees being grown for lumber

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Biological Asset
Bearer Biological
 Those are held to produce bear produce. Only the produce is harvested while the bearer biological
assets remains.
Examples:
1. Livestock from which milk is produced
2. Fruit trees from which is harvested

Living animals, whether consumable or bearer are classified as biological assets if they relate to agricultural
activity. However, living plants are classified as biological assets only if they are consumable. Bearer plants are
classified as PPE.

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Agricultural Produce
Agricultural produce is the harvested produce of the entity’s biological assets.

Harvest is the detachment of produce from a biological asset or the cessation of a biological asset’s life
processes.

Example: Apple Tree

a) Apple Tree – bearer plant, accounted under PAS 16 (PPE)

b) Apple Fruit growing on the tree – PAS 41
c) Harvested apple – agricultural produce PAS 41
d) Apple pie – subjected to processing PAS 2 (Inventories)

Nature of Assets Type of Asset

Living animal or plant
Unprocessed harvested product
Processed product
Biological Asset (PAS 41). However
bearer plants are classified as PPE
(PAS 16)
Agricultural Produce (PAS 41)
Inventory (PAS 2)

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Items are included and excluded from the scope
of PAS 41:
The table below shows examples of items that are included and excluded from the scope of PAS 41:
Agricultural Produce
Products AFTER
Biological Assets Bearer Plants at the point of
harvest
(PAS 41) (PAS 16) harvest
(PAS 2)
(PAS 41)
Sheep Wool Yarn, Carpet
Trees in a timber
Felled trees Logs, lumber
plantation
Dairy cattle Milk Cheese
Sausages, cured
Pigs Carcass
hams
Cotton plants Harvested cotton Thread, clothing
Sugarcane Harvested cane Sugar
Tobacco plants Picked leaves Cured tobacco
Tea bushes Picked leaves Tea
Grape vines Picked grapes Wine
Fruit trees Picked fruit Processed fruits
Oil palms Picked fruit Palm oil
Rubber trees Harvested latex Rubber products
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Agriculture Activity
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.

Examples:
a) Raising livestock
b) Forestry
c) Annual or perennial cropping
d) Cultivating orchard and plantations
e) Floriculture
f) Aquaculture (including fish farming)

Common features of agriculture activities:

1. Capability to change
2. Management of change
3. Measurement of change
.

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Agriculture Activity
Biological transformation comprises the processes of growth, degeneration, production, and procreation that
cause qualitative or quantitative changes in a biological asset.

a.) Asset changes through:

1. Growth
2. Degeneration
3. Procreation

b.) Production of agricultural produce

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Recognition & Measurement
Recognition:

A biological asset or agricultural produce is recognized when it meets the asset recognition criteria, including
the reliable measurement of its value or cost.

Measurement:

• Biological Asset
- initially and subsequently measured at FVLCTS (cost of disposal)
- gain or loss arising from initial measurement and subsequent changes in FVLCTS are
recognized in profit or loss
- biological asset that is previously measured at FVLCTS is continued to be measured at FVLCTS
until it is disposed of.

• Agricultural Procedure
- shall be measured always at FVLCTS at the point of harvest.
- gain or loss arising from initial measurement and subsequent changes in FVLCTS are
recognized in profit or loss

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Exercise
DAD Company has reclassified certain assets as biological assets . The total value of the forest assets is
Php6,000,000 which compromises:

Free standing trees………………….5,100,000

Land under trees…………………….600,000
Roads in the forest………………….300,000

In the financial portion, what is the total amount of the forest asset should be classified as biological assets?
How would be classified as Property, Plant and equipment?

Biological Asset – 5,100,000

PPE – 900,000

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Exercise
Ericka Company provided the following:

Value of biological asset at acquisitions cost on December 31, 2020…………………………………600,000

Fair valuation on surplus on initial recognition at fair value on December 31, 2020…………………700,000
Change in fair value to December 31, 2021 due to growth and price fluctuation…………………….100,000
Decrease in fair value due to harvest………………………………………………………………………90,000

What is the carrying amount of the biological asset on December 31, 2021? 1,310,000

What is the amount to be reported in the 2021 income statement? 10,000

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