July 2004
Agriculture
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COPYRIGHT
© 2004 Commonwealth of Australia
This AASB Standard contains International Accounting Standards Committee Foundation copyright material. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to The Administration Director, Australian Accounting Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007.
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ISSN 1036-4803
AASB141 2 COPYRIGHT
CONTENTS
Preface
Comparison With International Pronouncements
Accounting Standard
AASB141 Agriculture
Paragraphs
Objective
Application Aus1.1 – Aus1.7
Scope 1 – 4
Definitions
Agriculture-Related Definitions 5 – 7
General Definitions 8 – 9
Recognition and Measurement 10 – 25
Gains and Losses 26 – 29
Inability to Measure Fair Value Reliably 30 – 33
Government Grants 34 – Aus38.1
Disclosure
General 40 – 53
Additional Disclosures for Biological Assets Where Fair Value Cannot be Measured Reliably 54 – 56
Government Grants 57
Appendices:
A. Australian Illustrative Examples Page23
B. Illustrative Examples (see separate booklet)
DIFFERENCES BETWEEN AASB141 AND AASB1037 Page31
BASIS FOR CONCLUSIONS ON IAS41
(available to AASB online subscribers or through the IASB)
Australian Accounting Standard AASB141 Agriculture is set out in paragraphs Aus1.1– 57. All the paragraphs have equal authority. Terms defined in this Standard are in italics the first time they appear in the Standard. AASB141 is to be read in the context of other Australian Accounting Standards, including AASB1048 Interpretation and Application of Standards, which identifies the UIG Interpretations. In the absence of explicit guidance, AASB108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.
AASB141 4 CONTENTS
Preface
Reasons for Issuing AASB141
The Australian Accounting Standards Board (AASB) is implementing the Financial Reporting Council’s policy of adopting the Standards of the International Accounting Standards Board (IASB) for application to reporting periods beginning on or after 1 January 2005. The AASB has decided it will continue to issue sector-neutral Standards, that is, Standards applicable to both for-profit and not-for-profit entities, including public sector entities. Except for Standards that are specific to the not-for-profit or public sectors or that are of a purely domestic nature, the AASB is using the IASB Standards as the “foundation” Standards to which it adds material detailing the scope and applicability of a Standard in the Australian environment. Additions are made, where necessary, to broaden the content to cover sectors not addressed by an IASB Standard and domestic, regulatory or other issues.
The IASB defines International Financial Reporting Standards (IFRSs) as comprising:
(a) International Financial Reporting Standards;
(b) International Accounting Standards; and
(c) Interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC).
The Australian equivalents to IFRSs are:
(a) Accounting Standards issued by the AASB that are equivalent to Standards issued by the IASB, being AASBs1–99 corresponding to the IFRS series and AASBs101–199 corresponding to the IAS series; and
(b) UIG Interpretations issued by the AASB corresponding to the Interpretations adopted by the IASB, as listed in AASB1048 Interpretation and Application of Standards.
Main Features of this Standard
Application Date
This Standard is applicable to annual reporting periods beginning on or after 1January 2005. To promote comparability among the financial reports of Australian entities, early adoption of this Standard is not permitted.
First-time Application and Comparatives
Application of this Standard will begin in the first annual reporting period beginning on or after 1January 2005 in the context of adopting all Australian equivalents to IFRSs. The requirements of AASB1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards, the Australian equivalent of IFRS1 First-time Adoption of International Financial Reporting Standards, must be observed. AASB1 requires prior period information, presented as comparative information, to be restated as if the requirements of this Standard had always applied. This differs from previous Australian requirements where changes in accounting policies did not require the restatement of the income statement and balance sheet of the preceding period.
Main Requirements
The Standard:
(a) prescribes the accounting treatment and disclosures related to agricultural activity. Agricultural activity is the management by an entity of the biological transformation of living animals or plants (biological assets) for sale, into agricultural produce, or into additional biological assets;
(b) requires biological assets to be measured at fair value less estimated pointofsale costs from initial recognition of the biological assets up to the point of harvest, other than when fair value cannot be measured reliably on initial recognition;
(c) requires that, where fair value cannot be measured reliably on initial recognition, biological assets are to be measured at cost less any accumulated depreciation and any accumulated impairment losses. Once the fair value of the biological asset can be reliably measured, the biological asset is measured at its fair value less estimated point of sale costs;
(d) deems that the cost of agricultural produce is its fair value less estimated point of sale costs at the point of harvest;
(e) requires changes in fair value less estimated point of sale costs to be included in profit or loss for the period in which it arises;
(f) prescribes specific requirements for government grants related to a biological asset; and
(g) requires specific disclosures in relation to biological assets.
Differences between this Standard and AASB1037
There are a number of differences between this Standard and the AASB standard that it supersedes, AASB1037 Self-Generating and Regenerating Assets. These differences include:
(a) the narrower scope of AASB141;
(b) the accounting for some biological assets under lease;
(c) the inclusion of a rebuttable presumption in AASB141 in relation to the reliable measurement of the fair value of biological assets; and
(d) AASB141 contains specific requirements for accounting for government grants related to biological assets measured at fair value less estimated point-of-sale costs.
A more detailed description of the differences between this Standard and AASB1037 accompanies this Standard under the heading “Differences between AASB141 and AASB1037”.
The requirements of the superseded AASB1037 are essentially the same as AAS35 Self-Generating and Regenerating Assets. Accordingly, there is no separate analysis of differences between AASB141 and AAS35.
AASB141 7 PREFACE
Comparison with International Pronouncements
AASB141 and IAS41
AASB141 is equivalent to IAS41 Agriculture issued by the IASB. Paragraphs that have been added to this Standard (and do not appear in the text of the equivalent IASB standard) are identified with the prefix “Aus”, followed by the number of the relevant IASB paragraph and decimal numbering. Paragraphs that apply only to notforprofit entities begin by identifying their limited applicability.
Compliance with IAS41
Forprofit entities that comply with AASB141 will simultaneously be in compliance with IAS41. Notforprofit entities using the added “Aus” paragraphs in the Standard that specifically apply to notforprofit entities may not be simultaneously complying with IAS41. Whether a notforprofit entity will be in compliance with IAS41 will depend on whether the “Aus” paragraphs provide additional guidance for notforprofit entities or contain requirements that are inconsistent with the corresponding IASB Standard and will be applied by the notforprofit entity.
AASB141 and IPSASs
International Public Sector Accounting Standards (IPSASs) are issued by the Public Sector Committee of the International Federation of Accountants.
There is no specific IPSAS dealing with accounting for agriculture at present.
AASB 141 8 COMPARISON
ACCOUNTING STANDARD AASB141
The Australian Accounting Standards Board makes Accounting Standard AASB141 Agriculture under section 334 of the Corporations Act 2001.
D.G. BoymalDated 15 July 2004 / Chair – AASB
aCCOUNTING STANDARD AASB141Agriculture
Objective
The objective of this Standard is to prescribe the accounting treatment, financial statement presentation, and disclosures related to agricultural activity.
Application
Aus1.1 This Standard applies to:
(a) each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is a reporting entity;
(b) general purpose financial reports of each other reporting entity; and
(c) financial reports that are, or are held out to be, general purpose financial reports.
Aus1.2 This Standard applies to annual reporting periods beginning on or after 1January 2005.
Aus1.3 This Standard shall not be applied to annual reporting periods beginning before 1January 2005.
Aus1.4 The requirements specified in this Standard apply to the financial report where information resulting from their application is material in accordance with AASB1031 Materiality.
Aus1.5 When applicable, this Standard supersedes:
(a) AASB1037 Self-Generating and Regenerating Assets as notified in the Commonwealth of Australia Gazette NoS390, 7August 1998 and as amended by AASB1037A Amendments to Accounting Standard AASB1037, which was notified in the Commonwealth of Australia Gazette, NoS314 8July 1999; and
(b) AAS35 Self-Generating and Regenerating Assets as issued in August 1998 and as amended by AAS35A Amendments to Australian Accounting Standard AAS35, which was issued in July 1999.
Aus1.6 AASB1037, AASB1037A, AAS35 and AAS35A remain applicable until superseded by this Standard.
Aus1.7 Notice of this Standard was published in the Commonwealth of Australia Gazette NoS294, 22July 2004.
Scope
1. This Standard shall be applied to account for the following when they relate to agricultural activity:
(a) biological assets;
(b) agricultural produce at the point of harvest; and
(c) government grants covered by paragraphs 34-35.
2. This Standard does not apply to:
(a) land related to agricultural activity (see AASB116 Property, Plant and Equipment and AASB140 Investment Property); and
(b) intangible assets related to agricultural activity (see AASB138 Intangible Assets).
3. This Standard is applied to agricultural produce, which is the harvested product of the entity’s biological assets, only at the point of harvest. Thereafter, AASB102 Inventories or another applicable Standard is applied. Accordingly, this Standard does not deal with the processing of agricultural produce after harvest; for example, the processing of grapes into wine by a vintner who has grown the grapes. While such processing may be a logical and natural extension of agricultural activity, and the events taking place may bear some similarity to biological transformation, such processing is not included within the definition of agricultural activity in this Standard.
4. The table below provides examples of biological assets, agricultural produce, and products that are the result of processing after harvest:
Biological assets / Agricultural produce / Products that are the result of processing after harvestSheep / Wool / Yarn, carpet
Trees in a plantation forest / Logs / Lumber
Plants / Cotton / Thread, clothing
Harvested cane / Sugar
Dairy cattle / Milk / Cheese
Pigs / Carcass / Sausages, cured hams
Bushes / Leaf / Tea, cured tobacco
Vines / Grapes / Wine
Fruit trees / Picked fruit / Processed fruit
Definitions
Agriculture-Related Definitions
5. The following terms are used in this Standard with the meanings specified.
Agricultural activity is the management by an entity of the biological transformation of biological assets for sale, into agricultural produce, or into additional biological assets.
Agricultural produce is the harvested product of the entity’s biological assets.
A biological asset is a living animal or plant.
Biological transformation comprises the processes of growth, degeneration, production, and procreation that cause qualitative or quantitative changes in a biological asset.
A group of biological assets is an aggregation of similar living animals or plants.
Harvest is the detachment of produce from a biological asset or the cessation of a biological asset’s life processes.
6. Agricultural activity covers a diverse range of activities; for example, raising livestock, forestry, annual or perennial cropping, cultivating orchards and plantations, floriculture, and aquaculture (including fish farming). Certain common features exist within this diversity:
(a) Capability to change. Living animals and plants are capable of biological transformation;
(b) Management of change. Management facilitates biological transformation by enhancing, or at least stabilising, conditions necessary for the process to take place (for example, nutrient levels, moisture, temperature, fertility, and light). Such management distinguishes agricultural activity from other activities. For example, harvesting from unmanaged sources (such as ocean fishing and deforestation) is not agricultural activity; and
(c) Measurement of change. The change in quality (for example, genetic merit, density, ripeness, fat cover, protein content, and fibre strength) or quantity (for example, progeny, weight, cubic metres, fibre length or diameter, and number of buds) brought about by biological transformation is measured and monitored as a routine management function.
7. Biological transformation results in the following types of outcomes:
(a) asset changes through (i) growth (an increase in quantity or improvement in quality of an animal or plant); (ii) degeneration (a decrease in the quantity or deterioration in quality of an animal or plant); or (iii) procreation (creation of additional living animals or plants); or
(b) production of agricultural produce such as latex, tea leaf, wool, and milk.
General Definitions
8. The following terms are used in this Standard with the meanings specified.
An active market is a market where all the following conditions exist:
(a) the items traded within the market are homogeneous;
(b) willing buyers and sellers can normally be found at any time; and