PAS 41 - Agriculture
Objectives
● To prescribe the accounting treatment and disclosures related to
agricultural activity
● Applies to biological assets (except bearer plants), agricultural
produce at harvest, and government grants related to biological
assets
Agricultural Activity
● Management of biological transformation and harvest of biological
assets for sale or conversion into agricultural produce or additional
biological assets
● Includes activities like raising livestock, forestry, cultivating orchards,
floriculture, aquaculture, and cropping
Three-Part Test for Agricultural Activities:
1) Capability to Change - Animals and plants must be alive and
capable of biological transformation.
2) Management of Change - Human intervention is required to facilitate
biological transformation (e.g., feeding, maintaining conditions).
3) Measurement of Change - There must be a basis to measure
changes (e.g., weight, genetic merit, size).
Biological Transformation
1) Growth - Increase in quantity or quality.
2) Degeneration - Decrease in quantity or quality.
3) Procreation - Creation of additional animals or plants.
4) Production - Agricultural produce.
Managing Animal-Related Recreational Activities:
● Not considered agricultural activity, as there is no transformation of
biological assets (e.g., zoos).
● Ocean Fishing - not considered agricultural activity, as it involves
harvesting from unmanaged resources.
Difference Between Biological Asset and Agricultural Produce:
a) Biological Asset - A living animal or plant.
b) Agricultural Produce - The harvested product from a biological asset.
Examples:
● Biological Asset - Sheep, trees, dairy cattle, pigs, cotton plants.
● Agricultural Produce - Wool, felled trees, milk, carcasses, harvested
cotton.
● Processed Products - Yarn, logs, cheese, sausages, thread, sugar.
Recognition
Recognized when:
1) The entity controls the asset due to past events.
2) Future economic benefits are probable.
3) Fair value or cost can be reliably measured.
Measurement
Biological assets:
● Initially measured at cost, then at fair value less costs to sell once
measurable.
● Fair value presumption applies unless it is rebutted at initial
measurement.
Agricultural produce:
● Measured at fair value less cost to sell at the point of harvest.
Contract Prices and Fair Value
● Contract prices are not equivalent to fair value. Fair value reflects
current market conditions, not contract terms.
Gain/Loss on Biological Assets and Agricultural Produce:
● Gains or losses are recognized in profit or loss when they arise.
● Gains can arise from initial recognition, growth, or harvesting.
Government Grants for Biological Assets:
● Measured at fair value less cost to sell if applicable.
● Conditional grants are recognized when conditions are met, and
unconditional grants when receivable.
Presentation
Presentation of Biological Assets and Agricultural Produce:
● Non-current assets - Biological assets that will not be harvested or
sold within 12 months (e.g., livestock, trees).
● Current assets - Biological assets or produce expected to be
harvested or sold within 12 months.
Disclosure Requirements
● Gain/Loss - Aggregate gain or loss from initial recognition of biological
assets and agricultural produce, and subsequent fair value changes.
● Group Descriptions - Narrative or quantified description of biological
asset groups, nature of activities, maturity, immaturity, significance,
and output during the reporting period.
● Measurement Bases - Methods used to determine fair value.
● Independent Appraiser - Whether an independent appraiser was used
for valuation.
● Discount Rate - The rate used to calculate net present values, if
applicable.
● Fair Value Changes - Details of any significant changes in fair value
from the prior period.
● Restrictions/Pledging - Any restrictions on title or pledging of
biological assets as security.
● Commitments - Any future commitments to develop or acquire
biological assets.
● Risk Management - Specific risk management strategies employed by
the entity.
● Sustainability - Information on activities that are unsustainable, with
estimated cessation dates.
