IAS 41 — Agriculture



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Overview

IAS 41 Agri­cul­ture sets out the accounting for agri­cul­tural activity – the trans­for­ma­tion of bi­o­log­i­cal assets (living plants and animals) into agri­cul­tural produce (harvested product of the entity’s bi­o­log­i­cal assets). The standard generally requires bi­o­log­i­cal assets to be measured at fair value less costs to sell.

IAS 41 was orig­i­nally issued in December 2000 and first applied to annual periods beginning on or after 1 January 2003.

History of IAS 41

Date	De­vel­op­ment	Comments
December 1999	Exposure Draft E65 Agri­cul­ture	Comment deadline 31 January 2000
December 2000	IAS 41 Agri­cul­ture issued	Operative for annual financial state­ments covering periods beginning on or after 1 January 2003
22 May 2008	Amended by Im­prove­ments to IFRSs (discount rates)	Effective for annual periods beginning on or after 1 January 2009
30 June 2014	Amended by Agri­cul­ture: Bearer Plants (Amend­ments to IAS 16 and IAS 41)	Effective for annual periods beginning on or after 1 January 2016

Related In­ter­pre­ta­tions

• None

Amend­ments under con­sid­er­a­tion by the IASB

• None

Summary of IAS 41

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).

Scope

IAS 41 applies to bi­o­log­i­cal assets with the exception of bearer plants, agri­cul­tural produce at the point of harvest, and gov­ern­ment grants related to these bi­o­log­i­cal assets. It does not apply to land related to agri­cul­tural activity, in­tan­gi­ble assets related to agri­cul­tural activity, gov­ern­ment grants related to bearer plants, and bearer plants. However, it does apply to produce growing on bearer plants.

Note: Bearer plants were excluded from the scope of IAS 41 by Agri­cul­ture: Bearer Plants (Amend­ments to IAS 16 and IAS 41), which applies to annual periods beginning on or after 1 January 2016.

Key de­f­i­n­i­tions

[IAS 41.5]

Bi­o­log­i­cal asset

A living animal or plant

Bearer plant*

A living plant that:

1. is used in the pro­duc­tion or supply of agri­cul­tural produce
2. is expected to bear produce for more than one period, and
3. has a remote like­li­hood of being sold as agri­cul­tural produce, except for in­ci­den­tal scrap sales.

Agri­cul­tural produce

The harvested product from bi­o­log­i­cal assets

Costs to sell

The in­cre­men­tal costs directly at­trib­ut­able to the disposal of an asset, excluding finance costs and income taxes

• De­f­i­n­i­tion included by Agri­cul­ture: Bearer Plants (Amend­ments to IAS 16 and IAS 41), which applies to annual periods beginning on or after 1 January 2016.
  

Initial recog­ni­tion

An entity recog­nises a bi­o­log­i­cal asset or agri­cul­ture produce only when the entity controls the asset as a result of past events, it is probable that future economic benefits will flow to the entity, and the fair value or cost of the asset can be measured reliably. [IAS 41.10]

Mea­sure­ment

Bi­o­log­i­cal assets within the scope of IAS 41 are measured on initial recog­ni­tion and at sub­se­quent reporting dates at fair value less estimated costs to sell, unless fair value cannot be reliably measured. [IAS 41.12]

Agri­cul­tural produce is measured at fair value less estimated costs to sell at the point of harvest. [IAS 41.13] Because harvested produce is a mar­ketable commodity, there is no ‘mea­sure­ment re­li­a­bil­ity’ exception for produce.

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, are included in profit or loss. [IAS 41.26]

A gain on initial recog­ni­tion (e.g. as a result of har­vest­ing) of agri­cul­tural produce at fair value less costs to sell are included in profit or loss for the period in which it arises. [IAS 41.28]

All costs related to bi­o­log­i­cal assets that are measured at fair value are recog­nised as expenses when incurred, other than costs to purchase bi­o­log­i­cal assets.

IAS 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 recog­nised, does not have a quoted market price in an active market and for which al­ter­na­tive fair value mea­sure­ments are de­ter­mined to be clearly un­re­li­able. In such a case, the asset is measured at cost less ac­cu­mu­lated de­pre­ci­a­tion and im­pair­ment losses. But the entity must still measure all of its other bi­o­log­i­cal assets at fair value less costs to sell. If cir­cum­stances change and fair value becomes reliably mea­sur­able, a switch to fair value less costs to sell is required. [IAS 41.30]

Guidance on the de­ter­mi­na­tion of fair value is available in IFRS 13 Fair Value Mea­sure­ment.  IFRS 13 also requires dis­clo­sures about fair value mea­sure­ments.

Other issues

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. [IAS 41.51]

Agri­cul­tural produce is measured at fair value less costs to sell at harvest, and this mea­sure­ment is con­sid­ered the cost of the produce at that time (for the purposes of IAS 2 In­ven­to­ries or any other ap­plic­a­ble standard). [IAS 41.13]

Agri­cul­tural land is accounted for under IAS 16 Property, Plant and Equipment. However, bi­o­log­i­cal assets (other than bearer plants) that are phys­i­cally attached to land are measured as bi­o­log­i­cal assets separate from the land.  In some cases, the de­ter­mi­na­tion of the fair value less costs to sell of the bi­o­log­i­cal asset can be based on the fair value of the combined asset (land, im­prove­ments and bi­o­log­i­cal assets). [IAS 41.25]

In­tan­gi­ble assets relating to agri­cul­tural activity (for example, milk quotas) are accounted for under IAS 38 In­tan­gi­ble Assets.

Gov­ern­ment grants

Un­con­di­tional gov­ern­ment grants received in respect of bi­o­log­i­cal assets measured at fair value less costs to sell are recog­nised in profit or loss when the grant becomes re­ceiv­able. [IAS 41.34]

If such a grant is con­di­tional (including where the grant requires an entity not to engage in certain agri­cul­tural activity), the entity recog­nises the grant in profit or loss only when the con­di­tions have been met. [IAS 41.35]

Dis­clo­sure

Dis­clo­sure re­quire­ments in IAS 41 include:

• aggregate gain or loss from the initial recog­ni­tion of bi­o­log­i­cal assets and agri­cul­tural produce and the change in fair value less costs to sell during the period* [IAS 41.40]
• de­scrip­tion of an entity’s bi­o­log­i­cal assets, by broad group [IAS 41.41]
• de­scrip­tion of the nature of an entity’s ac­tiv­i­ties with each group of bi­o­log­i­cal assets and non-fi­nan­cial measures or estimates of physical quan­ti­ties of output during the period and assets on hand at the end of the period [IAS 41.46]
• in­for­ma­tion about bi­o­log­i­cal assets whose title is re­stricted or that are pledged as security [IAS 41.49]
• com­mit­ments for de­vel­op­ment or ac­qui­si­tion of bi­o­log­i­cal assets [IAS 41.49]
• financial risk man­age­ment strate­gies [IAS 41.49]

• rec­on­cil­i­a­tion of changes in the carrying amount of bi­o­log­i­cal assets, showing sep­a­rately changes in value, purchases, sales, har­vest­ing, business com­bi­na­tions, and foreign exchange dif­fer­ences* [IAS 41.50]

• Separate and/or ad­di­tional dis­clo­sures are required where bi­o­log­i­cal assets are measured at cost less ac­cu­mu­lated de­pre­ci­a­tion [IAS 41.55]

Dis­clo­sure of a quan­ti­fied de­scrip­tion of each group of bi­o­log­i­cal assets, dis­tin­guish­ing between con­sum­able and bearer assets or between mature and immature assets, is en­cour­aged but not required. [IAS 41.43]

If fair value cannot be measured reliably, ad­di­tional required dis­clo­sures include: [IAS 41.54]

• de­scrip­tion of the assets
• an ex­pla­na­tion of why fair value cannot be reliably measured
• if possible, a range within which fair value is highly likely to lie
• de­pre­ci­a­tion method
• useful lives or de­pre­ci­a­tion rates
• gross carrying amount and the ac­cu­mu­lated de­pre­ci­a­tion, beginning and ending.

If the fair value of bi­o­log­i­cal assets pre­vi­ously measured at cost sub­se­quently becomes available, certain ad­di­tional dis­clo­sures are required. [IAS 41.56]

Dis­clo­sures relating to gov­ern­ment grants include the nature and extent of grants, un­ful­filled con­di­tions, and sig­nif­i­cant decreases expected in the level of grants. [IAS 41.57]

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