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IAS 41 –
AGRICULTURE
BY SABI AKTHER 1
 What to focus on?

• Definition

• Recognition criteria

• Subsequent Measurement

• Assets outside the scope of IAS 41 Agriculture

• Agriculture and government grants

• Disclosures

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 Definition

• IAS 41 Agriculture applies to biological assets and to agricultural produce at the point of harvest.

• A biological asset is 'a living plant or animal'

• Agricultural produce is 'the harvested product 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

Application of IAS 41 definitions

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 Recognition Criteria

A biological asset should be recognised if

• it is probable that future economic benefits will flow to the entity from the asset

• the cost or fair value of the asset can be reliably measured

• the entity controls the asset

Initial recognition

• Biological assets are initially measured at fair value less estimated costs to sell.

• Gains and losses may arise in profit or loss when a biological asset is first recognised. For example:

• A loss can arise because estimated selling costs are deducted from fair value.
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• A gain can arise when a new biological asset (such as a lamb or a calf) is born.
 Subsequent Measurement

• At each reporting date, biological assets are revalued to fair value less costs to sell.

• Gains and losses arising from changes in fair value are recognised in profit or loss for the period in
which they arise.

• The fair value of a biological asset may change because of its age, or because prices in the market have
changed. IAS 41 recommends separate disclosure of physical and price changes because this
information is likely to be of interest to users of the financial statements. However, this is not
mandatory.

• Biological assets are presented separately on the face of the statement of financial position within non-
current assets
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 Subsequent Measurement

Inability to measure fair value

• IAS 41 presumes that the fair value of biological assets should be capable of being measured reliably.

• If market prices are not readily available then the biological asset should be measured at cost less
accumulated depreciation and accumulated impairment losses.

• Once the asset's fair value can be measured reliably, it should be remeasured to fair value less costs to
sell

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 Subsequent Measurement

Agricultural produce

• At the date of harvest, agricultural produce should be recognised and measured at fair value less
estimated costs to sell.

• Gains and losses on initial recognition are included in profit or loss (operating profit) for the period.

• After produce has been harvested, it becomes an item of inventory. Therefore, IAS 41 ceases to apply.
The initial measurement value at the point of harvest is the deemed 'cost' for the purpose of IAS 2
Inventories, which is applied from then onwards.

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 Assets outside the scope of IAS 41

IAS 41 does not apply to intangible assets (such as production quotas), bearer plants, or to land related to
agricultural activity.

• In accordance with IAS 38, intangible assets are measured at cost less amortisation or fair value less
amortisation.

• Bearer plants are used to produce agricultural produce for more than one period. Examples include
grape vines or tea bushes. Bearer plants are accounted for in accordance with IAS 16 Property, Plant
and Equipment.

• However, any unharvested produce growing on a bearer plant, such as grapes on a grape vine, is a
biological asset and so is accounted for in accordance with IAS 41.
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 Assets outside the scope of IAS 41

IAS 41 does not apply to intangible assets (such as production quotas), bearer plants, or to land related to
agricultural activity.

• Land is not a biological asset. It is treated as a tangible non-current asset and accounted for under IAS
16 Property, Plant and Equipment.

• When valuing a forest, for example, the trees must be accounted for separately from the land that
they grow on

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 Agriculture & govt. grants

If a government grant relates to a biological asset measured at its cost less accumulated depreciation and
accumulated impairment losses, it is accounted for under IAS 20 Accounting for Government Grants and
Disclosure of Government Assistance.

If a government grant relates to biological assets measured at fair value less costs to sell, then it is
accounted for under IAS 41 Agriculture as follows:

• An unconditional government grant related to a biological asset measured at its fair value less costs to
sell shall be recognised in profit or loss when it becomes receivable.

• A conditional government grant related to a biological asset measured at its fair value less costs to sell,
shall be recognised in profit or loss when the conditions attaching to the government grant are met
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 Disclosures

IAS 41 says that an entity must disclose:

• A description of each group of biological assets

• Methods and significant assumptions used when determining fair value

• A reconciliation of the carrying amounts of biological assets between the beginning and the end of the
reporting period.

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 Summary
IAS 41

Measurement Measurement of AP
Definition
• IAS 41 applies to • Biological assets are • At the date of harvest,
initially measured at fair agricultural produce
biological assets
value less estimated costs should be recognised
and to agricultural
to sell and measured at fair
produce at the
• At each reporting date, value less estimated
point of harvest
biological assets are costs to sell
revalued to fair value less • After produce has
costs to sell. been harvested, it
• Gains and losses arising becomes an item of
from changes in fair inventory, then use
value are recognised in IAS 2.
profit or loss

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Thank You for Watching!!

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