Pas 41 Agriculture

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PAS 41 - AGRICULTURE
FRANCIS H. VILLAMIN
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PAS 41 - AGRICULTURE
Learning Objectives
• Differentiate the following: biological assets, bearer
plants, agricultural produce and inventory.
• State the initial and subsequent measurement of
biological assets and agricultural produce.
• State the accounting for government grants that are
within the scope of PAS 41.
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INTRODUCTION
• AGRICULTURE means farming or the process

of producing crops and raising livestock.
• PAS 41 prescribes the accounting an disclosures
for agricultural and related activity.
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SCOPE
PAS 41 is applied to account for the following when they relate to

agricultural activity:
a. Biological assets, except for bearer plants.
b. Agricultural produce at the point of harvest; and
c. Unconditional government grants related to a biological asset
measured at its fair value less cost to sell
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SCOPE - CONTINUATION
PAS 41 does not apply to the following:

a. Land (PAS 16 PPE and PAS 40 Investment Property)
b. Bearer plants related to agricultural activity (PAS 16). However,
PAS 41 applies to the produce on those bearer plants.
c. Government grants related to bearer plants (PAS 20 Acctg. for Gov’t.
Grants and Disclosure of Gov’t. Assistance
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SCOPE - CONTINUATION
PAS 41 does not apply to the following:

d. Intangible assets (PAS 38 Intangible Assets).
• PAS 41 is applied to agricultural produce at the point of harvest.

After the point of harvest, PAS 2 Inventories or other applicable
standard is applied.
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 Nature of asset Type of asset
 Living animal or plant Biological asset (PAS 41)
However, bearer plants are
classified as Property, Plant
and Equipment (PAS 16)
 Unprocessed harvested Agricultural produce
product (PAS 41)
 Processed harvested Inventory (PAS 2)

product
8 MOOOO!!!
LIVE COW - BIOLOGICAL ASSET

INVENTORY
INVENTORY
CARCASS - AGRICULTURAL PRODUCE INVENTORY

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BIOLOGICAL ASSET
• Biological asset is a “living animal or plant.”

• “Bio” means life. Therefore dead plants
and other non-living things cannot qualify
as biological assets.
10 CONSUMABLE VS. BEARER
BIOLOGICAL ASSETS
Biological assets are either consumable or bearer.

a. Consumable - those that are to be harvested as agricultural
produce or sold as biological assets. Ex. Timber
b. Bearer - those other than consumable biological assets. Ex. Fruit
tree
• PAS 41 applies to both consumable and bearer animals. However,

PAS 41 only to consumable plants but not to bearer plants.
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MAIZE PLANT – ANNUAL CROP

(CONSUMMABLE – PAS 41)
MANGO TREE
(BEARER PLANT – PAS 16)
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BEARER PLANT
• It is a living plant that
a. Is used in the production or supply of agricultural
produce.
b. Is expected to bear produce for more than one
period.
c. Has remote likelihood of being old as agricultural
produce except for incidental scrap sales.
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POINTS TO REMEMBER
ITEMS APPLICABLE STANDARD
• Bearer and Consumable Animals PAS 41
• Consumable plants PAS 41
• Bearer Plants PAS 16
• Produce growing on bearer plants PAS 41

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AGRICULTURAL ACTIVITY
• PAS 41 applies to biological assets, agricultural

produce and gov’t. grants only when they relate to
agricultural activity.
• Agricultural activity is the management by an entity
of the biological transformation of biological assets
for sale, into agricultural produce, or into additional
biological assets.
COMMON FEATURES OF
15 AGRICULTURAL ACTIVITY
a. Capability to change – Living animals and plants are capable of

biological transformation.
b. Management of change – Management facilitates biological
transformation by enhancing, or at least stabilizing, conditions necessary
for the process to take place.
• Harvesting from unmanaged sources is not agricultural activity.
c. Measurement of change – The change in quality or quantity brought

about by biological transformation is measured and monitored as a
routine management function.
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BIOLOGICAL TRANSFORMATION
• It comprises the following processes that cause qualitative changes
in a biological asset.
1. Asset changes through:
a. Growth – is an increase in quantity or improvement
in quality of an animal or plant.
b. Procreation – is the creation of additional living
animals or plants.
c. Degeneration – is a decrease in the quantity or deterioration
in quality of an animal or plant.
II. Production of agricultural produce.
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AGRICULTURAL PRODUCE
• It is the harvested produce of the entity’s biological
assets. This is in the natural state and not yet
processed.
• Those that are already subjected to processing are
treated as “Inventories”.
• “Harvest” is the detachment of produce from a
biological asset or the cessation of a biological asset’s
life processes.
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POINTS TO REMEMBER
NATURE OF ASSET TYPE OF ASSET
• Living animal or plant Biological Asset (PAS 41)

Bearer Plants (PAS 16)
• Unprocessed harvested produce Agricultural Produce (PAS 41)
• Processed produce Inventory (PAS 2)

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POINTS TO REMEMBER
Biological Agricultural Products that
Asset Bearer Plants Produce at are the result of
(PAS 41) (PAS 16) Point of Harvest processing after
(PAS 41) harvest (PAS 2 –
Inventories)
Sheep Wool Yarn, Carpet
Trees in a Felled trees Logs, Lumber

timber plantation
Dairy cattle Milk Cheese
Pigs Carcass Sausages, cured hams
Cotton Plants Harvested cotton Thread, Clothing
Sugarcane Harvested cane Sugar
Tobacco Plants Picked leaves Cured tobacco

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POINTS TO REMEMBER
Biological Agricultural Products that
Asset Bearer Plants Produce at are the result of
(PAS 41) (PAS 16) Point of Harvest processing after
(PAS 41) harvest (PAS 2 –
Inventories)
Tea bushes Picked leaves Tea
Grape vines Picked grapes Wine
Fruit trees Picked fruit Processed fruit
Oil Palms Picked fruit Palm Oil
Rubber trees Harvested latex Rubber products

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RECOGNITION
A biological asset or agricultural produce is recognized when:

a. the entity controls the asset as a result of past events;
b. it is probable that future economic benefits associated with the asset will
flow to the entity; and
c. the fair value or cost of the asset can be measured reliably.
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MEASUREMENT
• 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.
• 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 PAS 2 Inventories or
another applicable standard.
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MEASUREMENT - CONTINUATION
• A biological asset is measured at cost less accumulated depreciation

and accumulated impairment loss if the fair value of the biological asset
cannot be measured reliably on initial recognition.
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DEFINITIONS
• Fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement
date.
• Costs to sell are the incremental costs directly attributable to the disposal of an
asset, excluding finance costs and income taxes (e.g., Commissions to brokers,
Levies by regulatory agencies and commodity exchanges, and Transfer taxes and
duties)
• Costs to sell do not include transport costs, advertising costs, income taxes, and
interest expense.
• If location is a characteristic of the biological asset, the price in the principal (or
most advantageous) market shall be adjusted for the transport costs.
25 GAINS AND LOSSES
• 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.
GOVERNMENT GRANTS
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Nature of government grant Accounting procedure
 Government grant (a) is  Recognize income equal to fair
unconditional and (b) relates to value of the grant when the
biological asset measured at grant becomes receivable.
FVLCS
 Government grant is conditional  Recognize income only when

condition is met.
 Government grant relates to  Account for the grant under PAS
biological asset measured at 20
cost
 Government grant is conditional  Recognize income using
but a portion of the grant is straight-line method
retained according to the time
that has elapsed
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ENCOURAGED DISCLOSURES
Disclosure of the following information is encouraged but not required:

1) Disclosure of consumable and bearer biological assets.
2) Disclosure of mature and immature biological assets.
a. Mature biological assets are those that have attained harvestable specifications or are
able to sustain regular harvests.
b. Immature biological assets are those that have not yet attained harvestable
specifications or are not yet able to sustain regular harvests.
3) Disclosure of breakdown of total “Gain (loss) from changes in FVLCS”

during the period attributable to price change and physical change
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THANK YOU

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1

• AGRICULTURE means farming or the process

PAS 41 is applied to account for the following when they relate to

PAS 41 does not apply to the following:

PAS 41 does not apply to the following:

• PAS 41 is applied to agricultural produce at the point of harvest.

 Processed harvested Inventory (PAS 2)

LIVE COW - BIOLOGICAL ASSET

CARCASS - AGRICULTURAL PRODUCE INVENTORY

• Biological asset is a “living animal or plant.”

Biological assets are either consumable or bearer.

• PAS 41 applies to both consumable and bearer animals. However,

MAIZE PLANT – ANNUAL CROP

• Bearer and Consumable Animals PAS 41

• Consumable plants PAS 41

• Bearer Plants PAS 16

• Produce growing on bearer plants PAS 41

• PAS 41 applies to biological assets, agricultural

a. Capability to change – Living animals and plants are capable of

c. Measurement of change – The change in quality or quantity brought

• Living animal or plant Biological Asset (PAS 41)

• Unprocessed harvested produce Agricultural Produce (PAS 41)

• Processed produce Inventory (PAS 2)

Trees in a Felled trees Logs, Lumber

Pigs Carcass Sausages, cured hams

Cotton Plants Harvested cotton Thread, Clothing

Sugarcane Harvested cane Sugar

Tobacco Plants Picked leaves Cured tobacco

Tea bushes Picked leaves Tea

Grape vines Picked grapes Wine

Fruit trees Picked fruit Processed fruit

Oil Palms Picked fruit Palm Oil

Rubber trees Harvested latex Rubber products

A biological asset or agricultural produce is recognized when:

• A biological asset shall be measured on initial recognition and at the end

• Agricultural produce harvested from an entity’s biological assets shall be

• A biological asset is measured at cost less accumulated depreciation

• A gain or loss arising on initial recognition of a biological asset

 Government grant is conditional  Recognize income only when

Disclosure of the following information is encouraged but not required:

3) Disclosure of breakdown of total “Gain (loss) from changes in FVLCS”

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