IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

32 AGRICULTURE (lAS 41)

1. BACKGROUND AND INTRODUCTION Th e main objective of lAS 4 1 is to establish accounting standa rds for agricultural activity . This Stand ard applies to biological asse ts, agricultura l produ ce at the point of harvest , and go vernme nt grants. Th e Standard does not apply to land related to ag ric ultura l ac tivi ty , whic h is covered by lAS 16, Property. Plant. and Equipment. and lAS 40, Investment Property. or to intangible assets re lated to agricultural activity, which are co vered by lAS 38 , Intangible Assets. 2. DEFINITIONS OF KEY TERMS (in accordance with lAS 41) Biological assets. Living plant s and anima ls. Ag r icult ural produce. The harvested product of the entity ' s biological asse ts, for example, mi lk and coffee bean s. Biologic al transformation. Relate s to the proc esses of growth, degeneration, and production that can ca use changes of quant itative or qual itative nature in a biological asset. Activ e market. One where these condi tions ex ist: The items traded in the market are homoge– nous; willing buyers and se llers normally ca n be found at any time ; and prices are available to the pu blic. Fair va lue. The amount for which an asset can be excha nged or a liabi lity settled in an arm' s– length transacti on between knowledgeable and willing pa rtie s. The fair value of an asse t is based on its present location and co nditio n. Gove r nme nt grants. Th ose as defined in lAS 20, Accounting f or Government Grants and Dis– closure of Government Assistance.

Case Study 1

Facts An entity on adoption of lAS 41 has reclassified certain assets as biological assets. The total value of the group' s forest assets is $2,000 million comprising

$m 1.700 200 ---.l.QQ 2 000

Freestanding trees Landunder trees Roads in forests

Required Show how the forests would be classified in the financial statements. So lution The forests would be classified as

$m 1.700 200 ---.l.QQ 2 000

Biological assets Noncurrent assets- land Noncurrent assets-other tangible assets

3. RECOGNITION AND MEASUREMENT

3.1 An entity should recogni ze a biological asse t or agric ultura l produ ce when the enterprise • Controls the asset as a resu lt of past eve nts; and • It is probable that future eco nomic benefits will flow to the entity.