- Distribution at no charge or for a nominal charge; or
- Conversion into agricultural produce or into additional biological assets for sale or for distribution at no charge or for a nominal charge.
Agricultural activity covers a diverse range of activities; for example, raising livestock, forestry, annual or perennial cropping, cultivating orchards and plantations, floriculture and aquaculture (including fish farming). Certain common features exist within this diversity:
- Capability to change. Living animals and plants are capable of biological transformation;
- Management of change. Management facilitates biological transformation by enhancing, or at least stabilising, conditions necessary for the process to take place (for example, nutrient levels, moisture, temperature, fertility, and light). Such management distinguishes agricultural activity from other activities. For example, harvesting from unmanaged sources (such as ocean fishing and deforestation) is not agricultural activity; and
- Measurement of change. The change in quality (for example, genetic merit, density, ripeness, fat cover, protein content, and fibre strength) or quantity (for example, progeny, weight, cubic metres, fibre length or diameter, and number of buds) brought about by biological transformation or harvest is measured and monitored as a routine management function.
Biological transformation results in the following types of outcomes:
- asset changes through (i) growth (an increase in quantity or improvement in quality of an animal or plant), (ii) degeneration (a decrease in the quantity or deterioration in quality of an animal or plant), or (iii) procreation (creation of additional living animals or plants); or
- production of agricultural produce such as latex, tea leaf, wool, and milk.
IAS 41 is applied to account for the following when they relate to agricultural activity:
- biological assets;
- agricultural produce at the point of harvest; and
- government grants related to biological assets.
However, it does not apply to:
- land related to agricultural activity (see IAS 16 Property, Plant and Equipment and IAS 40 Investment Property)
- intangible assets related to agricultural activity (see IAS 38 Intangible Assets)
- the entity controls the asset as a result of past events;
- it is probable that future economic benefits associated with the asset will flow to the entity; and
- the fair value or cost of the asset can be measured reliably.
Recognition and measurement
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.
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. Similarly, 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.
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 measureable, 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.
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 and only when, the government grant becomes receivable.
If a government grant related to a biological asset measured at its fair value less costs to sell is conditional, including when a government grant requires an entity not to engage in specified agricultural activity, an entity shall recognise the government grant in profit or loss when and only when, the conditions attaching to the government grant are met.
Has the entity disclosed the aggregate gain or loss arising during the current period on initial recognition of biological assets and agricultural produce and the change in fair value less costs to sell of biological assets?
Has the entity provided a description of each group of biological assets, either in narrative or quantified form?
Has the entity provided a quantified description of each group of biological assets, distinguishing between consumable and bearer biological assets or between mature and immature biological assets, as appropriate? Has the entity also disclosed the basis for making any such distinctions?
Note this disclosure is encouraged but not mandatory.
If not disclosed elsewhere in information published with the financial statements, has the entity disclosed:
Has the entity disclosed:
Has the entity presented 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:
Does the entity measure biological assets at their cost less any accumulated depreciation and any accumulated impairment losses at the end of the period?
If so, has the entity disclosed for such biological assets:
Did the entity measure biological assets at their cost less any accumulated depreciation and any accumulated impairment losses during the current period?
If yes, have they disclosed any gain or loss recognised on disposal of such biological assets and the reconciliation required by paragraph 50 to disclose amounts related to such biological assets separately? In addition, the reconciliation shall include the following amounts included in profit or loss related to those biological assets:
If yes, has the entity shall disclose for those biological assets:
Has the entity disclosed the following information related to agricultural activity covered by IAS 41:
Examples from practice
Here are some items of interest when preparing financial statements of an entity with agricultural activities [derived from Nutreco NV, the Netherlands – Financial Statements 2014]:
- Accounting policy Biological assets
- Raw material to profit or loss and in inventory
- Note 9.2 Biological assets
- Operating segments reporting (partly)
And here is a disclosure of an acquisition in these same financial statements:
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