Exposure Draft
Indian Accounting Standard (Ind AS) 41,
Agriculture
(Last date for Comments: October 15, 2014)
Issued by
Accounting Standards Board
The Institute of Chartered Accountants of India
Indian Accounting Standard (Ind AS) 41
Agriculture
CONTENTS
from paragraph
INTRODUCTION IN1
INDIAN ACCOUNTING S TANDARD 41
AGRICULTURE
OBJECTIVE
SCOPE 1
DEFINITIONS 5
Agriculture-related definitions 5
General definitions 8
RECOGNITION AND MEASUREMENT 10
Gains and losses 26
Inability to measure fair value reliably 30
GOVERNMENT GRANTS 34
DISCLOSURE 40
General 40
Additional disclosures for biological assets where 54
fair value cannot be measured reliably
Government grants 57
Exposure Draft
Indian Accounting Standard (Ind AS) 41
Agriculture
Following is the Exposure Draft of Indian Accounting Standard (Ind AS) 41,
Agriculture issued by the Accounting Standards Board of The Institute of Chartered
Accountants of India, for comments. The Board invites comments on any specific
aspect of the Exposure Draft. Comments are most helpful if they indicate the specific
paragraph or group of paragraphs to which they relate, contain a clear rationale
and, where applicable, provide a suggestion for alternative wording.
Comments should be submitted in writing to the Secretary, Accounting Standards
Board, The Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No.
7100, Indraprastha Marg, New Delhi 110 002, so as to be received not later than
October 15, 2014. Comments can also be sent by email to commentsasb@icai.in
Further clarifications on this standard amendment may be sought by e-mail to
achin.poddar@icai.in
(The Exposure Draft of the Indian Accounting Standard includes paragraphs set in
bold type and plain type, which have equal authority. Paragraphs in bold type
indicate the main principles. (This Exposure Draft of the amendments Indian
Accounting Standard should be read in the context of its objective and the Preface to
the Statements of Accounting Standards1)
Objective
The objective of this Standard is to prescribe the accounting
treatment and disclosures related to agricultural activity.
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 and
35.
2 This Standard does not apply to:
(a) land related to agricultural activity (see Ind AS 16 Property,
Plant and Equipment and Ind AS 40 Investment Property);
1
Attention is specifically drawn to paragraph 4.3 of the Preface, according to which accounting
standards are intended to apply only to items which are material
(b) bearer plants related to agricultural activity (see Ind AS
16). However, this Standard applies to the produce on
those bearer plants.
(c) government grants related to bearer plants (see Ind AS
20 Accounting for Government Grants and Disclosure
of Government Assistance).
(d) intangible assets related to agricultural activity (See Ind AS
38 Intangible Assets).
3 This Standard is applied to agricultural produce, which is the
harvested produce of the entity's biological assets, at the point
of harvest. Thereafter, Ind AS 2 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 harvest
Sheep Wool Yarn, carpet
Trees in a timber Felled Trees Logs, lumber
plantation
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
Some plants, for example, tea bushes, grape vines, oil palms and rubber
trees, usually meet the definition of a bearer plant and are within the scope
of Ind AS 16. However, the produce growing on bearer plants, for example,
tea leaves, grapes, oil palm fruit and latex, is within the scope of Ind AS 41.
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 and harvest of biological assets
for sale or for conversion into agricultural produce or into
additional biological assets.
Agricultural produce is the harvested product of the entity's
biological assets.
A bearer plant is a living plant that:
(a) is used in the production or supply of agricultural
produce;
(b) is expected to bear produce for more than one period;
and
(c) has a remote likelihood of being sold as agricultural
produce, except for incidental scrap sales.
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.
Costs to sell are the incremental costs directly attributable to
the disposal of an asset, excluding finance costs and income
taxes.
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.
5A The following are not bearer plants:
(a) plants cultivated to be harvested as agricultural
produce (for example, trees grown for use as
lumber);
(b) plants cultivated to produce agricultural produce
when there is more than a remote likelihood that the
entity will also harvest and sell the plant as
agricultural produce, other than as incidental scrap
sales (for example, trees that are cultivated both for
their fruit and their lumber); and
(c) annual crops (for example, maize and wheat).
5B When bearer plants are no longer used to bear produce they
might be cut down and sold as scrap, for example, for use as
firewood. Such incidental scrap sales would not prevent the
plant from satisfying the definition of a bearer plant.
5C Produce growing on bearer plants is a biological asset.
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 or harvest 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:
Carrying amount is the amount at which an asset is
recognised in the balance sheet.
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. (See
Ind AS 1 13 Fair Value Measurement.)
Government grants are as defined in Ind AS 20 .
9 [Deleted]
Recognition and measurement
10 An entity shall recognise a biological asset or agricultural
produce when, and only 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.
11 In agricultural activity, control may be evidenced by, for
example, legal ownership of cattle and the branding or
otherwise marking of the cattle on acquisition, birth, or
weaning. The future benefits are normally assessed by
measuring the significant physical attributes.
12 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, except for the case described in paragraph 30
where the fair value cannot be measured reliably.
13 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 Ind AS 2 Inventories or another applicable
Standard.
14 [Deleted]
15 The fair value measurement of a biological asset or agricultural
produce may be facilitated by grouping biological assets or
agricultural produce according to significant attributes; for
example, by age or quality. An entity selects the attributes
corresponding to the attributes used in the market as a basis
for pricing.
16 Entities often enter into contracts to sell their biological assets
or agricultural produce at a future date. Contract prices are
not necessarily relevant in measuring fair value, because fair
value reflects the current market conditions in which market
participant buyers and sellers would enter into a transaction. As
a result, the fair value of a biological asset or agricultural
produce is not adjusted because of the existence of a contract.
In some cases, a contract for the sale of a biological asset or
agricultural produce may be an onerous contract, as defined in
Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets. Ind AS
37 applies to onerous contracts.
17-21 [Deleted]
22 An entity does not include any cash flows for financing the
assets, taxation, or re-establishing biological assets after harvest
(for example, the cost of replanting trees in a plantation forest
after harvest).
23 [Deleted]
24 Cost may sometimes approximate fair value, particularly when:
(a) little biological transformation has taken place since
initial cost incurrence (for example, for seedlings planted
immediately prior to the end of a reporting period or
newly acquired livestock); or
(b) the impact of the biological transformation on price is not
expected to be material (for example, for the initial growth
in a 30-year pine plantation production cycle).
25 Biological assets are often physically attached to land (for
example, trees in a plantation forest). There may be no separate
market for biological assets that are attached to the land but an
active market may exist for the combined assets, that is, the
biological assets, raw land, and land improvements, as a
package. An entity may use information regarding the
combined assets to measure the fair value of the biological
assets. For example, the fair value of raw land and land
improvements may be deducted from the fair value of the
combined assets to arrive at the fair value of biological assets.
Gains and losses
26 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.
27 A loss may arise on initial recognition of a biological asset,
because costs to sell are deducted in determining fair value less
costs to sell of a biological asset. A gain may arise on initial
recognition of a biological asset, such as when a calf is born.
28 A gain or loss arising on initial recognition of agricultural
produce at fair value less costs to sell shall be included in
profit or loss for the period in which it arises.
29 A gain or loss may arise on initial recognition of agricultural
produce as a result of harvesting.
Inability to measure fair value reliably
30 There is a presumption that fair value can be measured
reliably for a biological asset. However, that presumption
can be rebutted only on initial recognition for a
biological asset for which quoted market prices are not
available and for which alternative fair value
measurements are determined to be clearly unreliable. In
such a case, that biological asset shall be measured at its
cost less any accumulated depreciation and any
accumulated impairment losses. Once the fair value of
such a biological asset becomes reliably measurable, an
entity shall measure it at its fair value less costs to sell.
Once a non-current biological asset meets the criteria to
be classified as held for sale (or is included in a disposal
group that is classified as held for sale) in accordance with
Ind AS 10 5 Non-current Assets Held for Sale and Discontinued
Operations, it is presumed that fair value can be measured
reliably.
31 The presumption in paragraph 30 can be rebutted only on
initial recognition. An entity that has previously measured a
biological asset at its fair value less costs to sell continues to
measure the biological asset at its fair value less costs to sell until
disposal.
32 In all cases, an entity measures agricultural produce at the point
of harvest at its fair value less costs to sell. This Standard reflects
the view that the fair value of agricultural produce at the point
of harvest can always be measured reliably.
33 In determining cost, accumulated depreciation and
accumulated impairment losses, an entity considers Ind AS 2, Ind
AS 16 and Ind AS 36 Impairment of Assets.
Government grants
34 An unconditional government grant related to a
biological asset measured at its fair value less costs to sell
shall be recognised in profit or loss when, and only when,
the government grant becomes receivable.
35 If a government grant related to a biological asset
measured at its fair value less costs to sell is conditional,
including when a government grant requires an entity not
to engage in specified agricultural activity, an entity
shall recognise the government grant in profit or loss
when, and only when, the conditions attaching to the
government grant are met.
36 Terms and conditions of government grants vary. For
example, a grant may require an entity to farm in a particular
location for five years and require the entity to return all of the
grant if it farms for a period shorter than five years. In this case,
the grant is not recognised in profit or loss until the five years
have passed. However, if the terms of the grant allow part of
it to be retained according to the time that has elapsed, the
entity recognises that part in profit or loss as time passes.
37 If a government grant relates to a biological asset measured at
its cost less any accumulated depreciation and any accumulated
Impairment losses (see paragraph 30), Ind AS 20 is applied.
38 This Standard requires a different treatment from Ind AS 20, if a
government grant relates to a biological asset measured at its
fair value less costs to sell or a government grant requires an
entity not to engage in specified agricultural activity. Ind AS
20 is applied only to a government grant related to a
biological asset measured at its cost less any accumulated
depreciation and any accumulated impairment losses.
Disclosure
39 [Deleted]
General
40 An entity shall disclose the aggregate gain or loss
arising during the current period on initial recognition of
biological assets and agricultural produce and from the
change in fair value less costs to sell of biological assets.
41 An entity shall provide a description of each group of
biological assets.
42 The disclosure required by paragraph 41 may take the form of
a narrative or quantified description.
43 An entity is encouraged to provide a quantified description of
each group of biological assets, distinguishing between
consumable and bearer biological assets or between mature
and immature biological assets, as appropriate. For example,
an entity may disclose the carrying amounts of consumable
biological assets and bearer biological assets by group. An entity
may further divide those carrying amounts between mature
and immature assets. These distinctions provide information
that may be helpful in assessing the timing of future cash flows.
An entity discloses the basis for making any such distinctions.
44 Consumable biological assets are those that are to be harvested
as agricultural produce or sold as biological assets. Examples of
consumable biological assets are livestock intended for the
production of meat, livestock held for sale, fish in farms, crops
such as maize and wheat, produce on a bearer plant and trees being
grown for lumber. Bearer biological assets are those other than
consumable biological assets; for example, livestock from which
milk is produced and fruit trees from which fruit is harvested,.
Bearer biological assets are not agricultural produce but, rather,
are held to bear produce.
45 Biological assets may be classified either as mature biological
assets or immature biological assets. Mature biological assets
are those that have attained harvestable specifications (for
consumable biological assets) or are able to sustain regular
harvests (for bearer biological assets).
46 If not disclosed elsewhere in information published with
the financial statements, an entity shall describe:
(a) the nature of its activities involving each group
of biological assets; and
(b) non-financial measures or estimates of the physical
quantities of:
(i) each group of the entity's biological
assets at the end of the period; and
(ii) output of agricultural produce during the
period.
47-48 [Deleted]
49 An entity shall disclose:
(a) the existence and carrying amounts of biological
assets whose title is restricted, and the carrying
amounts of biological assets pledged as security for
liabilities;
(b) the amount of commitments for the development
or acquisition of biological assets; and
(c) financial risk management strategies related to
agricultural activity.
50 An entity shall present a reconciliation of changes in
the carrying amount of biological assets between the
beginning and the end of the current period. The
reconciliation shall include:
(a) the gain or loss arising from changes in fair value
less costs to sell;
(b) increases due to purchases;
(c) decreases attributable to sales and biological
assets classified as held for sale (or included in a
disposal group that is classified as held for sale) in
accordance with Ind AS 105;
(d) decreases due to harvest;
(e) increases resulting from business combinations;
(f) net exchange differences arising on the
translation of financial statements into a
different presentation currency, and on the
translation of a foreign operation into the
presentation currency of the reporting entity; and
(g) other changes.
51 The fair value less costs to sell of a biological asset can change
due to both physical changes and price changes in the
market. Separate disclosure of physical and price changes is
useful in appraising current period performance and future
prospects, particularly when there is a production cycle of more
than one year. In such cases, an entity is encouraged to
disclose, by group or otherwise, the amount of change in fair
value less costs to sell included in profit or loss due to physical
changes and due to price changes. This information is generally
less useful when the production cycle is less than one year
(for example, when raising chickens or growing cereal crops).
52 Biological transformation results in a number of types of physical
change--growth, degeneration, production, and procreation,
each of which is observable and measurable. Each of those
physical changes has a direct relationship to future economic
benefits. A change in fair value of a biological asset due to
harvesting is also a physical change.
53 Agricultural activity is often exposed to climatic, disease and
other natural risks. If an event occurs that gives rise to a
material item of income or expense, the nature and amount of
that item are disclosed in accordance with Ind AS 1 Presentation
of Financial Statements. Examples of such an event include an
outbreak of a virulent disease, a flood, a severe drought or frost,
and a plague of insects.
Additional disclosures for biological assets where fair value
cannot be measured reliably
54 If an entity measures biological assets at their cost less any
accumulated depreciation and any accumulated
impairment losses (see paragraph 30) at the end of the
period, the entity shall disclose for such biological assets:
(a) a description of the biological assets;
(b) an explanation of why fair value cannot be
measured reliably;
(c) if possible, the range of estimates within which
fair value is highly likely to lie;
(d) the depreciation method used;
(e) the useful lives or the depreciation rates used;
and
(f) the gross carrying amount and the
accumulated depreciation (aggregated with
accumulated impairment losses) at the
beginning and end of the period.
55 If, during the current period, an entity measures biological
assets at their cost less any accumulated depreciation and
any accumulated impairment losses (see paragraph 30), an
entity shall disclose any gain or loss recognised on
disposal of such biological assets and the reconciliation
required by paragraph 50 shall disclose amounts
related to such biological assets separately. In addition,
the reconciliation shall include the following amounts
included in profit or loss related to those biological
assets:
(a) impairment losses;
(b) reversals of impairment losses; and
(c) depreciation.
56 If the fair value of biological assets previously measured at
their cost less any accumulated depreciation and any
accumulated impairment losses becomes reliably
measurable during the current period, an entity shall
disclose for those biological assets:
(a) a description of the biological assets;
(b) an explanation of why fair value has become
reliably measurable; and
(c) the effect of the change.
Government grants
57 An entity shall disclose the following related to
agricultural activity covered by this Standard:
(a) the nature and extent of government grants
recognised in the financial statements;
(b) unfulfilled conditions and other contingencies
attaching to government grants; and
(c) significant decreases expected in the level of
government grants.
Consequential amendments to other Standards
Ind AS 1 Presentation of Financial Statements
Paragraph 54 is amended. New text is underlined.
Information to be presented in the balance sheet
54 As a minimum, the balance sheet shall include line items that
present the following amounts:
(a) ...
(f) biological assets within the scope of Ind AS 41 Agriculture;
(g) ...
Ind AS 17 Leases
Paragraph 2 is amended. Deleted text is struck through and new text is underlined.
Scope
2 ...
However, this Standard shall not be applied as the basis of measurement for:
(a) ...
(c) biological assets within the scope of Ind AS 41 Agriculture held by
lessees under finance leases (see Ind AS 41 Agriculture2); or
(b) biological assets within the scope of Ind AS 41 provided by lessors
under operating leases (see Ind AS 41).
Ind AS 23 Borrowing Costs
Paragraphs 4 and 7 are amended. Deleted text is struck through and new text is
underlined.
Scope
...
4 An entity is not required to apply the Standard to borrowing costs
directly attributable to the acquisition, construction or production of:
(a) a qualifying asset measured at fair value, for example a biological
asset within the scope of Ind AS 41 Agriculture; or
(b) ...
Definitions
...
7 Depending on the circumstances, any of the following may be
qualifying assets:
(a) ...
(e) investment properties.
(f) bearer plants.
Ind AS 36 Impairment of Assets
Paragraph 2 is amended. Deleted text is struck through and new text is underlined.
Scope
2 This Standard shall be applied in accounting for the impairment of all
assets, other than:
(a) ...
(g) biological assets related to agricultural activity within the
scope of Ind AS 41 Agriculture that are measured at fair value
less costs of disposal (see Ind AS 41 Agriculture);
(h) ...
Ind AS 40 Investment Property
Paragraphs 4 and 7 are amended. Deleted text is struck through and new text is
underlined.
Scope
...
4 This Standard does not apply to:
(a) biological assets related to agricultural activity (see Ind AS 41
Agriculture and Ind AS 16 Property, Plant and Equipment);
and
(b) ...
Classification of property as investment property or owner-occupied
property
...
7 Investment property is held to earn rentals or for capital appreciation
or both. Therefore, an investment property generates cash flows
largely independently of the other assets held by an entity. This
distinguishes investment property from owner-occupied property. The
production or supply of goods or services (or the use of property for
administrative purposes) generates cash flows that are attributable not
only to property, but also to other assets used in the production or
supply process. Ind AS 16 Property, Plant and Equipment applies to
owner-occupied property.
Appendix 1
Note: This Appendix is not a part of this Indian Accounting Standard. The purpose of this
Appendix is only to bring out the differences, if any, between Indian Accounting Standard
(Ind AS) 41 and the corresponding International Accounting Standard (IAS) 41, Agriculture.
.
Comparison with IAS 41, Agriculture
1. Different terminology is used in this standard, e.g., the term `balance sheet' is used
instead of `Statement of financial position', and `Statement of profit and loss' is
used instead of `Statement of Profit and Loss and comprehensive income'.
2. Following paragraphs appears as `Deleted `in IAS 41. However, in order to
maintain consistency with paragraphs numbers of IAS 41, the paragraphs
numbers are retained in Ind AS 41.
(i) Paragraph 9
(ii) Paragraph 14
(iii) Paragraphs 17-21
(iv) Paragraph 23
(v) Paragraph 39
(vi) Paragraphs 47-48
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