IAS 41– AGRICULTURE

Mr. Arshad Bhutta (CMA)

Expected Accomplishments
1
• Objective

2
• Scope

3
• Definitions

4
• Examples

5
• Recognition Criteria

6 • Initial Measurement – Biological Assets

7
• Initial Measurement – Agriculture Produce

8
• Subsequent Measurement – Biological Assets

9
• Biological Assets and Government Grants

10
• Exam Questions

Slide 2
Objective

The objective of IAS 41 is to establish standards of

accounting for agricultural activity

The management of the biological transformation of

biological assets (living plants and animals) into
agricultural produce (harvested product of the
entity's biological assets).

Slide 3
Scope
IAS 41 applies to biological assets with the
exception of :
Bearer plants
Agricultural produce at the point of harvest
Government grants related to these biological assets
Land related to agricultural activity
Intangible assets related to agricultural activity
Government grants related to bearer plants

Management of biological transformation of biological assets for:

Sale
Into agriculture produce
Into additional biological asset
Slide 4
Definitions
Biological Asset:
A living animal or plant
Bearer Plant:
A living plant that:
is used in the production or supply of agricultural produce
is expected to bear produce for more than one period
has a remote likelihood of being sold as agricultural produce, except for
incidental scrap sales
Agricultural Produce:
The harvested product from biological assets

Slide 5
Examples

Biological Asset Agricultural Produce Product result of further

processing after harvest

IAS 41 No IAS 41

Till Point of Harvest After Point of Harvest

IAS 41 IAS 2

Slide 6
Examples

Bearer Plant Agricultural Produce Product result of further

processing after harvest

IAS 16 No IAS 41

Till Point of Harvest After Point of Harvest

IAS 41 IAS 2

Slide 7
Examples

Biological Asset Agricultural Produce Product result of further

processing after harvest

IAS 41 No IAS 41

Till Point of Harvest After Point of Harvest

IAS 41 IAS 2

Slide 8
Recognition Criteria

It is probable that economic benefits will flow to

the entity
The cost or fair value of the asset can be reliably
measured
The entity controls the asset

Slide 9
Initial Measurement – Biological Assets

Initially Biological Assets are measured at;

Fair value less any estimated 'point of sale' costs

EXCEPTION

If FV can not be determined then we can use cost model

Slide 10
Initial Measurement – Agriculture Produce

Initially agriculture produce are measured at;

Fair value less any estimated 'point of sale' costs

Presentation
Any gain or loss as a result of change in FV will be presented

Statement of Profit & Loss

Fair value less costs to sell at the point of harvest is
taken as cost for the purpose of IAS 2 Inventories
Slide 11
Subsequent Measurement – Biological Assets

Subsequently Biological Assets are measured at;

Fair value less any estimated 'point of sale' costs

Presentation
Any gain or loss as a result of change in FV will be presented

Statement of Profit & Loss

Slide 12
Biological Assets & Government Grants

IAS 41 applies to government grants related to a

biological asset.
Unconditional government grants received in respect of
biological assets measured at fair value are reported as
income when the grant becomes receivable.
If such a grant is conditional (including where the grant
requires an entity not to engage in certain agricultural
activity), the entity recognizes it as income only when the
conditions have been met.

Slide 13
Exam Question
To which of the following items does IAS 41 Agriculture apply?
(i) A change in fair value of a herd of animals relating to the unit
price of the animals.
(ii) Logs held in a wood yard.
(iii) Farm land which is used for growing vegetables.
(iv) The cost of developing a new type of crop seed which is
resistant to tropical diseases.
 All four
 (i) only
 (i) and (ii) only
 (ii) and (iii) only

Slide 14
Exam Question
Identify whether the following items would be accounted for under
IAS 41 Agriculture or not.
Accounted for under IAS 41 Outside scope of IAS 41
Dairy cattle
Milk
Cheese

Slide 15
Exam Question
Magna owned cattle recorded in the financial statements at $10,500 on 1
January 20X4.
At 31 December 20X4 the cattle have a fair value of $13,000. If Magna sold the
cattle, commission of 2% would be payable.
What is the correct accounting treatment for the cattle at 31 December 20X4
according to IAS 41 Agriculture?
Hold at cost of $10,500
Revalue to $13,000, taking gain of $2,500 to the statement of profit or loss
Revalue to $13,000, taking gain of $2,500 to the revaluation surplus
Revalue to $12,740, taking gain of $2,240 to the statement of profit or loss

Slide 16
Thank You !