PAS 41 - AGRICULTURE

Objective of PAS 41 

• The objective of PAS 41 is to establish standards of accounting for
Agricultural Activity.
• Agricultural Activity is the management of the biological
transformation of biological assets (living plants and animals) into
agricultural produce (harvested product of the enterprise's biological
assets). 
Key Definitions:
 Agricultural activity is the management by an entity of the biological
transformation of biological assets for sale, into agricultural produce, or into
additional biological assets.
 Agricultural produce is the harvested product of the entity’s biological assets.
 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.
 Harvest is the detachment of produce from a biological asset or the cessation of
a biological asset’s life processes.
Key Definitions - continued
Bearer plant is a living plant that: 
a) Is used in the production process of agricultural produce, 
b) Is expected to bear produce for more than one period
c) Has a remote likelihood of being sold (except as part of incidental
scrap sales).
Due to difficulty of measuring BP at FV – C2S, BP is now classified as
PPE and measured at either cost model or revaluation model
Initial Recognition 

An enterprise should recognize a biological asset or

agriculture produce only when:
a) the enterprise controls the asset as a result of past events,
b) it is probable that future economic benefits will flow to the
enterprise, and
c) the fair value or cost of the asset can be measured reliably.
Measurement Principles
Biological assets should be measured on initial recognition
and at subsequent reporting dates at fair value less costs of
disposal, unless fair value cannot be reliably measured. 
Agricultural produce should be measured at fair value less
costs of disposal at the point of harvest. Because harvested
produce is a marketable commodity, there is no
measurement reliability' exception for produce. 
Gains on initial Recognition
The gain on initial recognition of biological assets at fair value, and
changes in fair value of biological assets during a period, are reported
in net profit or loss. 
A gain on initial recognition of agricultural produce at fair value should
be included in net profit or loss for the period in which it arises. 
All costs related to biological assets that are measured at fair value are
recognized as expenses when incurred, other than costs to purchase
biological assets.
 Measurement of BA at BS Date

• Measured at FV less Cost of disposal.

• The adjustment to FV less Cost of Disposal is
recognized in Profit or Loss.
• This shall not apply to AP since they are inventory.
Other Measurement Concepts
• Bearer plants are accounted for under PAS 16 using the cost model,
or the revaluation model. Before bearer plants are able to bear
agricultural produce (i.e. before maturity), they are accounted for as
self-constructed items of property, plant and equipment.
• The agricultural produce of the bearer plant remains within the scope
of PAS 41 and is therefore accounted for at fair value.
Other Measurement Concepts
 PAS 41 presumes that fair value can be reliably measured for most biological assets.
However, that presumption can be rebutted for a biological asset that, at the time it is
initially recognized in financial statements,. In such a case,
 The asset is measured at cost less accumulated depreciation and impairment losses if
the asset does not have a quoted market price in an active market and for which other
methods of reasonably estimating fair value are determined to be clearly inappropriate or
unworkable. 
 But the enterprise must still measure all of its other biological assets at fair value. If
circumstances change and fair value becomes reliably measurable, a switch to fair value
less disposal costs is required. 
 Other Issues
A. The change in fair value of biological assets is part physical change (growth,
etc.) and part unit price change. Separate disclosure of the two components
is encouraged, not required. 
B. Fair value measurement stops at harvest. PAS 2, Inventories, applies after
harvest. 
C. Agricultural land is accounted for under PAS 16, Property, Plant and
Equipment. However, biological assets that are physically attached to land are
measured as biological assets separate from the land.