CFAS PPT 26 - PAS 41 (Agriculture)

CONCEPTUAL
FRAMEWORK AND
ACCOUNTING STANDARDS
BAAE 14
SIR HABS
AGRICULTURE
PAS 41
LEARNING OBJECTIVES
• Differentiate the following: biological assets,

bearer plants, agricultural produce and inventory.
• State the initial and subsequent measurement of
biological assets and agricultural produce.
• State the accounting for government grants that
are within the scope of PAS 41.
SCOPE
PAS 41 is applied to account for the following when they relate to

agricultural activity:
a. Biological assets, except for bearer plants.
b. Agricultural produce at the point of harvest; and
c. Unconditional government grants related to a biological asset measured
at its fair value less cost to sell
SCOPE - CONTINUATION
PAS 41 does not apply to the following:
a. Land (PAS 16 PPE and PAS 40 Investment Property)
b. Bearer plants related to agricultural activity (PAS 16). However, PAS 41 applies to the
produce on those bearer plants.
c. Government grants related to bearer plants (PAS 20 Acctg. for Gov’t. Grants and
Disclosure of Gov’t. Assistance).
d. Intangible assets (PAS 38 Intangible Assets).
• PAS 41 is applied to agricultural produce at the point of harvest. After the point of
harvest, PAS 2 Inventories or other applicable standard is applied.
 Nature of asset Type of asset
 Living animal or plant Biological asset (PAS 41)
However, bearer plants are
classified as Property, Plant
and Equipment (PAS 16)
 Unprocessed harvested Agricultural produce
product (PAS 41)
 Processed harvested Inventory (PAS 2)

product
Biological Assets and Agricultural Produce
• Biological Asset is a living animal or plant
• Agricultural produce is the harvested produce of the entity’s biological assets
Biological assets Agricultural produce Products that are the result of
processing after harvest
Sheep Wool Yarn, carpet
Trees in a timber plantation Felled trees Logs, lumber
Dairy cattle Milk Cheese
Pigs Carcass Sausages, cured hams
Cotton plants Harvested cotton Thread, clothing
Sugarcane Harvested cane Sugar
Tobacco plants Picked leaves Cured tobacco
Tea bushes Picked leaves Tea
Grape vines Picked grapes Wine
Fruit trees Picked fruit Processed fruit
Oil palms Picked fruit Palm oil
Rubber trees Harvested latex Rubber products
MOOOO!!!
LIVE COW - BIOLOGICAL ASSET

INVENTORY
INVENTORY
INVENTORY
CARCASS - AGRICULTURAL PRODUCE
CONSUMABLE VS. BEARER BIOLOGICAL ASSETS
Biological assets are either consumable or bearer.

a. Consumable - those that are to be harvested as agricultural produce or sold as
biological assets. Ex. Timber
b. Bearer - those other than consumable biological assets. Ex. Fruit tree
• PAS 41 applies to both consumable and bearer animals. However, PAS 41 only
to consumable plants but not to bearer plants.
MAIZE PLANT – ANNUAL CROP
(CONSUMMABLE – PAS 41)
MANGO TREE
(BEARER PLANT – PAS 16)
INDICATIONS THAT IT IS A BEARER PLANT
• Used in the production or supply of agricultural produce;

• Expected to bear produce for more than one period; and
• Remote likelihood of being sold as agricultural produce, except for
incidental scrap sales.
AGRICULTURAL ACTIVITY
• PAS 41 applies to biological assets, agricultural produce and

gov’t. grants only when they relate to agricultural activity.
• 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.
COMMON FEATURES OF AGRICULTURAL ACTIVITY
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 stabilizing, conditions necessary for the process to take place.
• Harvesting from unmanaged sources is not agricultural activity.
c. Measurement of change – The change in quality or quantity brought about by

biological transformation is measured and monitored as a routine management
function.
RECOGNITION
A biological asset or agricultural produce is recognized when:

a. the entity controls the asset as a result of past events;
b. it is probable that future economic benefits associated with the asset will flow to the
entity; and
c. the fair value or cost of the asset can be measured reliably.
MEASUREMENT
• A biological asset shall be measured on initial recognition and at the end of each
reporting period at its fair value less costs to sell.
• Agricultural produce harvested from an entity’s biological assets shall be measured at its
fair value less costs to sell at the point of harvest. Such measurement is the cost at that
date when applying PAS 2 Inventories or another applicable standard.
MEASUREMENT - CONTINUATION
• A biological asset is measured at cost less accumulated depreciation and

accumulated impairment loss if the fair value of the biological asset cannot be
measured reliably on initial recognition.
DEFINITIONS
• Fair value is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.
• Costs to sell are the incremental costs directly attributable to the disposal of an asset,
excluding finance costs and income taxes (e.g., Commissions to brokers, Levies by
regulatory agencies and commodity exchanges, and Transfer taxes and duties)
• Costs to sell do not include transport costs, advertising costs, income taxes, and interest
expense.
• If location is a characteristic of the biological asset, the price in the principal (or most
advantageous) market shall be adjusted for the transport costs.
GAINS AND LOSSES
• A gain or loss arising on initial recognition of a biological asset at fair

value less costs to sell and from a change in fair value less costs to sell of a
biological asset shall be included in profit or loss for the period in which it
arises.
GOVERNMENT GRANTS
Nature of government grant Accounting procedure
 Government grant (a) is  Recognize income equal to fair
unconditional and (b) relates to value of the grant when the
biological asset measured at grant becomes receivable.
FVLCS

 Government grant is conditional  Recognize income only when
condition is met.
 Government grant relates to  Account for the grant under
biological asset measured at PAS 20
cost
 Government grant is conditional  Recognize income using
but a portion of the grant is straight-line method
retained according to the time
that has elapsed
ENCOURAGED DISCLOSURES
Disclosure of the following information is encouraged but not required:
1) Disclosure of consumable and bearer biological assets.
2) Disclosure of mature and immature biological assets.
a. Mature biological assets are those that have attained harvestable specifications or are able to
sustain regular harvests.
b. Immature biological assets are those that have not yet attained harvestable specifications or
are not yet able to sustain regular harvests.
3) Disclosure of breakdown of total “Gain (loss) from changes in FVLCS” during the
period attributable to price change and physical change
APPLICATION OF CONCEPTS

PROBLEM 2: FOR CLASSROOM DISCUSSION

end
• Millan, Z. B. (n.d.). Conceptual Framework & Accounting Standards (2020 ed.). Baguio
City, Philippines: BANDOLIN ENTERPRISE.

CFAS PPT 26 - PAS 41 (Agriculture)

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CONCEPTUAL

• Differentiate the following: biological assets,

PAS 41 is applied to account for the following when they relate to

 Processed harvested Inventory (PAS 2)

LIVE COW - BIOLOGICAL ASSET

Biological assets are either consumable or bearer.

• Used in the production or supply of agricultural produce;

• PAS 41 applies to biological assets, agricultural produce and

a. Capability to change – Living animals and plants are capable of biological

c. Measurement of change – The change in quality or quantity brought about by

A biological asset or agricultural produce is recognized when:

• A biological asset is measured at cost less accumulated depreciation and

• A gain or loss arising on initial recognition of a biological asset at fair

PROBLEM 2: FOR CLASSROOM DISCUSSION

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