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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
Freestanding trees
Landunder trees
Roads in forests
$m
1.700
200
---.l.QQ
2 000
Required
Show how the forests would be classified in the financial statements.
So lution
The forests would be classified as
Biological assets
Noncurrent assets- land
Noncurrent assets-other tangible assets
3. RECOGNITION AND MEASUREMENT
$m
1.700
200
---.l.QQ
2 000
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.