Objective
Sets out the accounting for agricultural activity — biological assets and agricultural produce at the point of harvest.
Scope
- Biological assets (except bearer plants), agricultural produce at the point of harvest, and certain government grants related to biological assets.
- Excludes land (IAS 16 / IAS 40), bearer plants (IAS 16), intangible assets (IAS 38), and produce after harvest (IAS 2). Produce growing on bearer plants is within IAS 41.
Key definitions
- Biological asset
- A living animal or plant.
- Agricultural produce
- The harvested product of biological assets (e.g. milk, wool, picked fruit).
- Bearer plant
- A living plant used to produce or supply agricultural produce, expected to bear produce for more than one period, and with only a remote chance of being sold as produce (e.g. tea bushes, grape vines).
Recognition & measurement
Recognition and measurement
- Recognise a biological asset when the entity controls it, future benefits are probable and fair value or cost can be measured reliably.
- Measure biological assets at fair value less costs to sell on initial recognition and at each reporting date.
- Gains and losses on initial recognition and from changes in fair value less costs to sell go to profit or loss.
- Agricultural produce is measured at fair value less costs to sell at the point of harvest; that amount becomes its cost under IAS 2.
- If fair value cannot be measured reliably on initial recognition (rebuttable presumption), use cost less depreciation and impairment until it can.
- An unconditional grant for a biological asset measured at fair value less costs to sell is recognised in profit or loss when it becomes receivable; a conditional one when the conditions are met.
Key disclosures
- Aggregate gain or loss arising in the period on initial recognition and from changes in fair value less costs to sell.
- Description of each group of biological assets.
- Reconciliation of carrying amounts, with changes from physical change and price change encouraged to be shown separately.
Common exam traps
- Bearer plants are PPE under IAS 16, but their unharvested produce is IAS 41.
- Costs to sell exclude transport costs to market; those are already reflected in fair value.
- After harvest, IAS 41 stops and IAS 2 takes over.
Worked example: Dairy herd
Scenario. A farm holds 100 dairy cows. At the start of the year fair value less costs to sell was $500 per cow; at the year end it is $560 per cow. No cows were bought or sold.
- Opening carrying amount = 100 × 500 = $50,000.
- Closing carrying amount = 100 × 560 = $56,000.
Answer: Recognise a $6,000 gain in profit or loss; herd carried at $56,000.
Practise MCQs on this standard
Test your understanding of IAS 41 with free chapter-wise MCQs and explanations in these question banks.