FR I - IAS 41 Agriculture (1)

FINANCIAL REPORTING 1
BACT 303
IAS 41 – Agriculture
Learning Outcomes
Upon completion of this topic, students will be able to:
Explain Agricultural activity, Biological assets, agricultural
produce, biological transformation and harvest
Provide the measurement and disclosure requirements of
IAS 41
Account for biological assets and agricultural produce in
accordance with IAS 41
IAS 41
Objectives
• The objective of IAS 41 is to establish standards of
accounting for agricultural activity – the management of
the biological transformation of biological assets (living
plants and animals) into agricultural produce (harvested
product of the entity's biological assets).
IAS 41 AGRICULTURE
Definitions
• Agricultural activity: The management of the

transformation of a biological asset for sale
into agricultural produce or another biological
asset.
• Biological asset: A living animal or plant.
• Agricultural produce: The harvested produce
of the entity’s biological assets.
IAS 41 AGRICULTURE
Definitions
• Biological transformation: The process of growth,

degeneration, production, and procreation that
cause an increase in the value or quantity of the
biological asset.
• Harvest: The process of detaching produce from a
biological asset or cessation of its life.
• Bearer Plant: is a living plant that:
– Is used in the production or supply of agricultural produce
– Is expected to bear produce for more than one period
– Has a remote likelihood of being sold (except scrap sales)
IAS 41 AGRICULTURE
Definitions
ITEM DESCRIPTION
A farmer buys a diary calf Biological asset
The calf grows into a matured cow Biological transformation
Farmer milks the cow The Milk has been harvested
Milk = agricultural produce
Farmer buys a cocoa seedling

The seedling after planting, grows into a
cocoa plant and bears fruits
The cocoa fruits are plucked of the cocoa
plant
IAS 41 AGRICULTURE
Scope
• Within scope:
– Biological assets
– Agricultural produce at the point of harvest
– Government grants related to biological assets.
• Excluded from scope:
– Land related to agricultural activity – covered by IAS 16 Property, Plant
and Equipment and IAS 40 Investment Property
– Intangible assets related to agricultural activity – covered by IAS 38
Intangible Assets.
– Bearer plants related to agricultural activity
– Government grants related to bearer plants.
– Right-of-use assets arising from a lease of land related to agricultural
activity (IFRS 16 Leases).
RECOGNITION
Criteria
• Biological assets or agricultural produce are
recognised when:
– Entity controls the asset as a result of a past event
– Probable that future economic benefit will flow to
the entity; and
– Fair value or cost of the asset can be measured
reliably.
Measurement
Biological Asset
• Initially:
• At fair value less estimated point-of-sale costs (except
where fair value cannot be estimated reliably)
• If no reliable measurement of fair value, biological assets
are stated at cost.
• Subsequently:
• At fair value less estimated point-of-sale costs (except
where fair value cannot be estimated reliably)
• If no reliable measurement of fair value, biological
assets are stated at cost less accumulated depreciation
and accumulated impairment losses.
Measurement
Agricultural Produce
• Produce harvested from biological assets is measured at
fair value less costs to sell at the point of harvest
• Such measurement is the cost at the date when applying
IAS 2 Inventory or another applicable IFRS.
• Fair value gains and losses

• Biological asset
• The gain or loss on initial recognition is included in profit or loss in
the period in which it arises
• Subsequent change in fair value is included in profit or loss in the
period it arises.
• Agricultural produce
• The gain or loss on initial recognition is included in included in
profit or loss in the period in which it arises.
Government Grants associated with
Agricultural Assets
 An unconditional government grant related to a
biological asset measured at fair value less estimated
point-of-sale costs is recognised as income when, and
only when, the government grant becomes available
 A conditional government grant, including where a

government grant requires an entity not to engage in
specified agricultural activity, is recognised as income
when and only when, the conditions of the grant are met.
 If the biological asset is measured at cost less accumulated

depreciation and impairment loss, then we apply IAS 20
Accounting for Government Grants and Disclosure of
Government Assistance
Summary
ILLUSTRATIONS
Question One
Goodwine is a company that grows and harvests grapes, which are
then sold to a wine producer. Goodwine measures assets at fair value,
when permitted by the accounting standards.
Goodwine has a vineyard, and on 01 July 20X1, the land had a fair value
of GHC 2m and the vines have fair value of GHC 500,000.
On 30 June 20X2, Goodwine harvests the grapes from its vines. The fair
value of the grapes was GHC 400,000, the vine was valued at GHC
520,000, and the land was valued at GHC 2.1m.
All selling costs are negligible and should be ignored.
Required: Discuss the accounting treatment of the above transaction in

the financial statements of Goodwine for the year ended 30 June 20X2
ILLUSTRATIONS
Question Two
On 01 January 20X1, a farmer had a herd of 100 cows, all of which were
2years old. At this date, the fair value less point of sale costs of the herd
was GHC 100,000. On 01 July 20X1, the farmer purchased 20 cows
(each two and half years old) for GHC 600 each.
As at 31 December 20X2, three-year-old cows sell at a market price of

GHC 900 each. Market autioneers have a charge of 2% per each cow
sold.
Required: Discuss the accounting treatment of the above transaction in

the financial statements of Goodwine for the year ended 30 June 20X2

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FINANCIAL REPORTING 1

• Agricultural activity: The management of the

• Biological transformation: The process of growth,

Farmer buys a cocoa seedling

• Fair value gains and losses

 A conditional government grant, including where a

 If the biological asset is measured at cost less accumulated

All selling costs are negligible and should be ignored.

Required: Discuss the accounting treatment of the above transaction in

As at 31 December 20X2, three-year-old cows sell at a market price of

Required: Discuss the accounting treatment of the above transaction in

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