Вы находитесь на странице: 1из 10

SESSION 07 IAS 41 AGRICULTURE

0701
OVERVIEW
Objective
To outline the accounting rules for agriculture.


INTRODUCTION
PRESENTATION
AND DISCLOSURE
RECOGNITION
AND
MEASUREMENT
GOVERNMENT
GRANTS
Objective
Scope
Definitions
Agricultural activity
Recognition
Measurement
Pricing
Gains and losses
If fair value cannot be determined
Presentation
Disclosure




SESSION 07 IAS 41 AGRICULTURE
0702
1 INTRODUCTION
1.1 Objective
The standard prescribes the accounting treatment and the presentation and disclosures
related to agricultural activity.
1.2 Scope
IAS 41 covers the following when they relate to agricultural activity:
biological assets,
agricultural produce at the point of harvest, and
government grants as described in the standard.

IAS 41 does not cover:
land related to agricultural activity (see IAS 16), or
intangible assets related to agricultural activity (see IAS 38).

1.3 Definitions

Agricultural activity is the management by an entity of the biological
transformation of biological assets into agricultural produce for sale, into
agricultural produce, or into additional biological assets.
A biological asset is a living animal or plant.
Biological transformation comprises the processes of growth, degeneration,
production, and procreation that cause qualitative and quantitative
changes in a biological asset.
Harvest is the detachment of produce from a biological asset or the
cessation of a biological assets life processes
Agricultural produce is the harvested product of the entitys biological
assets.


1.4 Agricultural activity
Agricultural activity covers a diverse range of activities, including raising livestock,
forestry, annual or perennial cropping, cultivating orchards and plantations,
floriculture, and aquaculture.
The common features of agricultural activity are as follows:
Capability to change living animals and plants are capable of biological
transformation.
SESSION 07 IAS 41 AGRICULTURE
0703
Management of change management facilitates biological changes by enhancing
or stabilising conditions (i.e. temperature, moisture, nutrient levels, fertility and
light).
Measurement of change the change in quality (i.e. ripeness, density, fat cover,
genetic merit) or quantity (weight, fibre length, cubic metres, and number of buds).
2 RECOGNITION AND MEASUREMENT
2.1 Recognition
An entity should recognise a biological asset when, and only when:
The entity controls the asset as a result of past event,
It is probable that future economic benefits associated with the asset will flow to the
entity, and
The fair value can be measured reliably.
2.2 Measurement
A biological asset should be measured on initial recognition and at the end of each
reporting period at its fair value less estimated point of sale costs, except where the fair
value cannot be measured reliably.
Agricultural produce harvested from an entitys biological assets should be measured at
its fair value less estimated point of sale costs at the point of harvest. Such
measurement is cost at that date when applying IAS 2 or another applicable IFRS.
Illustration 1

A farmer owned a dairy herd at 1 January 2008. The number of cows in the
herd was 100. The fair value of the herd at this date was $5,000. The fair values
of two-year animals at 31 December 2007 and three-year old animals at 31
December 2008 are $60 and $75, respectively.
Separating out the value increases of the herd into those relating to price
change and those relating to physical change gives the following valuation:
$
Fair value at 1 January 2008 5,000
Increase due to price change (100 ($60 $50)) 1,000
Increase due to physical change (100 ($75 $60)) 1,500

______
Fair value at 31 December 2008 7,500

______


SESSION 07 IAS 41 AGRICULTURE
0704
2.3 Pricing
Point of sale costs include commissions to brokers/dealers, levies by regulatory
agencies and transfer taxes and duties. They do not include transport and other costs
necessary to get the asset to the market.
If an active market exists for a biological asset or agricultural produce, the quoted price
in that market is the appropriate basis for determining the fair value of that asset. If an
entity has access to different active markets, the entity uses the most relevant one, ie if
the entity has access to two markets, it would use the price existing in the market
expected to be used.
If an active market does not exist, an entity uses one or more of the following, when
available, in determining fair value:
The most recent market transaction price, provided that there has been no
significant change in economic circumstances between the date of that transaction
and the end of the reporting period,
Market prices for similar assets with adjustment to reflect differences, and
Sector benchmarks such as the value of an orchard expressed per export tray,
bushel, or hectare, and the value of cattle expressed per kilogram of meat.
In some circumstances market determined prices or values may not be available for a
biological asset in its present condition. In such cases, an entity uses the present value
of expected net cash flows from the asset discounted at a current market determined
pre-tax rate in determining fair value.
Cost may sometimes approximate fair value, particularly when:
Little biological transformation has taken place since initial cost incurrence (i.e. for
fruit tree seedlings planted immediately before the end of the reporting period), or
The impact of the biological transformation on price is not expected to be material
(i.e. initial growth in a 30 year pine plantation production cycle).
2.4 Gains and losses
A gain or loss arising on initial recognition of a biological asset at fair value less point of
sale costs (as point of sale costs need to be deducted) and from a change in fair value
less estimated point of sale costs of a biological asset should be included in profit or loss
for the period in which it arises.
A gain or loss arising on initial recognition of agricultural produce at fair value less
estimated point of sale costs should be included in profit or loss for the period in which
it arises.
SESSION 07 IAS 41 AGRICULTURE
0705
2.5 If fair value cannot be determined
If the fair value on initial recognition cannot be determined for a biological asset as
market determined prices or values are not available and for which alternative estimates
of fair value are determined to be clearly unreliable, the biological asset should be
valued at cost less accumulated depreciation and any impairment losses. Once the fair
value of the asset can be reliably determined an entity should measure it at fair value
less estimated point of sale costs.
Example 1

As at 31 December 2007, a plantation consists of 100 Insignis Pine trees that
were planted 10 years earlier. Insignis Pine takes 30 years to mature, and will
ultimately be processed into building material for houses or furniture. The
entitys weighted average cost of capital is 6% per annum.
Only mature trees have established fair values by reference to a quoted price in
an active market. The fair value (inclusive of current transport costs to get 100
logs to market) for a mature tree of the same grade as in the plantation is:
As at 31 December 2007: 171
As at 31 December 2008: 165
Required:
(a) Assuming immaterial cash flow between now and the point of harvest,
estimate the fair value of the plantation as at:
(i) 31 December 2007; and
(ii) 31 December 2008.

(b) Analyse the gain between the two period ends:
(i) a price change; and
(ii) a physical change.



SESSION 07 IAS 41 AGRICULTURE
0706
3 GOVERNMENT GRANTS
An unconditional government grant related to a biological asset measured at its fair
value less estimated point of sale costs should be recognised as income when, and only
when the government grant becomes receivable.
If a government grant related to a biological asset measured at its fair value less
estimated point of sale costs is conditional, including where a government grant
requires an entity not to engage in specified agricultural activity, an entity should
recognise the government grant as income when, and only when, the conditions
attaching to it are met.
4 PRESENTATION AND DISCLOSURE
4.1 Presentation
An entity should present the carrying amount of it biological assets separately on the
face of its statement of financial position.
4.2 Disclosure
An entity should 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 the fair value less
estimated point of sale costs of biological assets.
The methods and assumptions applied in determining the fair value.
A reconciliation of changes in the carrying amount of biological assets between the
beginning and the end of the current period, including:
The nature and extent of government grants recognised in the financial statements, any
unfulfilled conditions attached to those grants and any significant decreases in the level
of grants.
SESSION 07 IAS 41 AGRICULTURE
0707
Illustration 2


Note 17 - Biological assets
See accounting principles page 69.

MSEK
Standing
forest
Group
Cost
Opening balance, 1 Jan 2004 27,761
Acquisition of forest properties standing forest 11
Change in value standing forest
Change in volume felling 1,643
Change in volume growth 1,628
Other change 88
Sale of forest properties
(opening balance) standing forest 236
Closing balance 31 Dec 2004 27,433


Opening balance, 1 Jan 2005 27,433
Acquisition of forest properties standing forest 19
Change in value standing forest
Change in volume felling and effects of storm 1,770
Change in volume growth 1,609
Other change 11
Sale of forest properties
(opening balance) standing forest 400
Closing balance 31 Dec 2005 26,902

The book value of Sveaskogs forest assets decreased by MSEK 557
in 2005. The fair value of the standing forest is MSEK 26,902
(27,433) and the estimated cost of forest land MSEK 2,070 (2,096).


Change in value of forest in the income statement
The income statement includes change in value of forest assets
with MSEK 180 (206).
Of this change, MSEK 326 (310) pertains to consolidated capital
gains from the sale of forest properties. Other change, MSEK 146
(104) is mainly due to the financial value of harvests being higher
than the value of growth in the forest.

Group
MSEK 2005 2004
Change in value of forest land and biological
sets standing forest in the balance sheet 557 353
Acquisition of forest properties 23 12
Sales revenue sold forest properties 756 567
Other 1 4
Sub-total 177 206
Plus change in value of lying,
unprocessed storm-felled forest 3
Total 180 206




SESSION 07 IAS 41 AGRICULTURE
0708
FOCUS
You should now be able to:

account for biological assets, agricultural produce at the point of harvest and
government grants;
discuss the recognition and measurement criteria including treatment of gains and
losses, and the inability to measure fair value reliably;
present and disclose information relating to agriculture.
SESSION 07 IAS 41 AGRICULTURE
0709
EXAMPLE SOLUTION
Solution 1
(a) Estimate of fair value
(i) 31 December 2007
The mature plantation would have been valued at 17,100.
20
06 . 1
100 , 17
= 5,332
(ii) 31 December 2008
The mature plantation would have been valued at 16,500.
19
06 . 1
500 , 16
= 5,453
(b) Analysis of gain
The difference in fair value of the plantation between the two period ends is 121
(5,453 5,332) which will be reported as a gain in profit or loss, analysed as follows:
(i) Price change
Relates to the biological assets state as at the previous period end.
Value at prices prevailing as at the current period end
20
06 . 1
500 , 16
= 5,145
less
value at prices prevailing as at the previous period end 5,332

________
Loss 187

________
(ii) Physical change
This is calculated at current prices.
Value in its state as at the current period end 5,453
less
value in its state as at the previous period end (as in (i)) 5,145

________
Gain 308

________
SESSION 07 IAS 41 AGRICULTURE
0710

Вам также может понравиться