IAS 41 Agricultural Activity And Produce – FAQ | IFRS

IAS 41 Agricultural activity and produce

The objective of IAS 41 is to prescribe the accounting treatment and disclosures related to agricultural activity.

Scope IAS 41 Agricultural activity and produce

IAS 41 shall be applied to account for the following when they relate to agricultural activity:

  1. biological assets, except for bearer plants;
  2. agricultural produce at the point of harvest; and
  3. conditional or unconditional grants relating to a biological asset measured at its fair value less costs to sell.

IAS 41 does not apply to:

  1. land related to agricultural activity;
  2. bearer plants related to agricultural activity. However, IAS 41 applies to the produce on those bearer plants;
  3. government grants related to bearer plants;
  4. intangible assets related to agricultural activity; and
  5. right-of-use assets arising from a lease of land related to agricultural activity.

Recognition and measurement of biological assets or agricultural produce

Recognition IAS 41 Agricultural activity and produce

An entity shall recognise a biological asset or agricultural produce when, and only when:

  1. the entity controls the asset as a result of past events;
  2. it is probable that future economic benefits associated with the asset will flow to the entity; and
  3. the fair value or cost of the asset can be measured reliably.

Measurement IAS 41 Agricultural activity and produce

Biological assets:

Agricultural assets:

A biological asset shall be measured on initial recognition and at the end of each reporting period at its fair value less costs to sell, except where the fair value cannot be measured reliably.

Agricultural produce harvested from an entity’s biological assets shall be measured at its fair value less costs to sell at the point of harvest. Such measurement is the cost at that date when applying IAS 2 Inventories or another applicable Standard.

Subsequent gains or losses

Biological assets:

Agricultural assets:

(a) A gain or loss arising on initial recognition of a biological asset at fair value less costs to sell and from a change in fair value less costs to sell of a biological asset shall be included in profit or loss for the period in which it arises.

(b) A loss may arise on initial recognition of a biological asset, because costs to sell are deducted in determining fair value less costs to sell of a biological asset. A gain may arise on initial recognition of a biological asset, such as when a calf is born.

(a) A gain or loss arising on initial recognition of agricultural produce at fair value less costs to sell shall be included in profit or loss for the period in which it arises.

(b) A gain or loss may arise on initial recognition of agricultural produce as a result of harvesting.

Inability to measure fair value reliably IAS 41 Agricultural activity and produce

There is a presumption that fair value can be measured reliably for a biological asset. However, that presumption can be rebutted only on initial recognition for a biological asset for which quoted market prices are not available and for which alternative fair value measurements are determined to be clearly unreliable.

In such a case, that biological asset shall be measured at its cost less any accumulated depreciation and any accumulated impairment losses.

Once the fair value of such a biological asset becomes reliably measurable, an entity shall measure it at its fair value less costs to sell.

Once a non-current biological asset meets the criteria to be classified as held for sale (or is included in a disposal group that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, it is presumed that fair value can be measured reliably.

Presentation and disclosure IAS 41 Agricultural activity and produce

An entity shall present and disclose information that enables users of the financial statements to evaluate the financial effects of agricultural produce and biological assets:

  1. An entity shall disclose the aggregate gain or loss arising during the current period on initial recognition of biological assets and agricultural produce and from the change in fair value less costs to sell of biological assets.
  2. An entity shall provide a description of each group of biological assets.
  3. If not disclosed elsewhere in information published with the financial statements, an entity shall describe:
    1. the nature of its activities involving each group of biological assets; and
    2. non-financial measures or estimates of the physical quantities of:
      • each group of the entity’s biological assets at the end of the period; and
      • the output of agricultural produce during the period.
  4. The existence and carrying amounts of biological assets whose title is restricted, and the carrying amounts of biological assets pledged as security for liabilities.
  5. The amount of commitments for the development or acquisition of biological assets.
  6. Financial risk management strategies related to agricultural activity.
  7. An entity shall present a reconciliation of changes in the carrying amount of biological assets between the beginning and the end of the current period. The reconciliation shall include:
    1. the gain or loss arising from changes in fair value less costs to sell;
    2. increases due to purchases;
    3. decreases attributable to sales and biological assets classified as held for sale (or included in a disposal group that is classified as held for sale);
    4. decreases due to harvest;
    5. increases resulting from business combinations;
    6. net exchange differences arising on the translation of financial statements into a different presentation currency, and on the translation of a foreign operation into the presentation currency of the reporting entity; and
    7. other changes.

If an entity measures biological assets at their cost less any accumulated depreciation and any accumulated impairment losses at the end of the period, the entity shall disclose for such biological assets:

  1. a description of the biological assets;
  2. an explanation of why fair value cannot be measured reliably;
  3. if possible, the range of estimates within which fair value is highly likely to lie;
  4. the depreciation method used;
  5. the useful lives or the depreciation rates used; and
  6. the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period.

If the fair value of biological assets previously measured at their cost less any accumulated depreciation and any accumulated impairment losses becomes reliably measurable during the current period, an entity shall disclose for those biological assets:

  1. a description of the biological assets;
  2. an explanation of why fair value has become reliably measurable; and
  3. the effect of the change

Additional disclosures for Government grants IAS 41 Agricultural activity and produce

An entity shall disclose the following related to agricultural activity covered by IAS 41:

  1. the nature and extent of government grants recognised in the financial statements;
  2. unfulfilled conditions and other contingencies attaching to government grants; and
  3. significant decreases expected in the level of government grants.

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