Agriculture (IAS 41)

Question 1

What is agriculture activity?

Answer 1

is the management by an entity of the biological transformation and harvest of living animals or plants for sale or conversion into agricultural produce or additional biological assets.

Question 2

Where does agriculture IAS 41 not apply?

Answer 2

It does not apply when it is a ‘bearer of the plant’

Entity is not involved in agricultural activity

Asset is land related to agricultural activity

Question 3

Agricultural activity: Pick grapes from a vine

What standard is Grapevine and grapes under?

and process picked grapes into wine

Answer 3

Grapevine is a ‘bearer plant’, thus IAS 16 PPE

Grapes = crop, thus IAS 41

Wine = IAS 2 Inventories

Question 4

Agricultural activity: chicken egg is laid

What standards:

Egg - as a food product

Egg - to breed more chickens

Answer 4

Eggs as food product would be under IAS 2 inventories

Egg to breed more chickens = biological asset
therefore IAS 41.

Question 5

How are IAS 41 assets measured?

Answer 5

At initial recognition and end of reporting period:

The asset should be measured at FV - cost to sell.

Gains/Losses on remeasurement of FV are taken to the IS.

Question 6

What is the exception to the measurement criteria of IAS 41? Cost may be used instead of FV - cost to sell if:

Answer 6

Cost may be used instead of FV - cost to sell if:

• Little biological transformation has taken place. ie. biological asset purchased close to the reporting period
• FV cannot be measured reliably

Question 7

How is biological treated once they reach the point of harvest?

Answer 7

the (FV minus cost to sell) would form the ‘cost’ for transfer to IAS 2 once the items are harvested.

Dr Inventories + cost to sell

Cr Biological assets
Cr cash (cost to sell)
Cr IS gain (usually balancing figure).