PAS 41: Agriculture

• PAS 41 is an industry specific PFRS. It applies to biological assets and agricultural produce at the point of harvest when they relate to agricultural activity
• PAS 16 applies to bearer plants but the produce growing on bearer plants is within the scope of PAS 41
• What do you call the management of the biological transformation and harvest of biological assets for sale, or for conversion into agricultural produce or into biological assets?

  Agricultural Activity
• Harvest is the detachment of produce from a biological asset or the cessation of a bio asset's life process
• Activities that are not considered as agricultural activity

  1. Harvesting from unmanaged sources
  2. Managing recreational activities
  3. Development of organism for research purposes
• Biological asset is a living animal or plant related to agricultural activity
• Agricultural produce is the harvested produce of the entity's biological assets
• List of biological assets

  
• What do you call to biological assets that are to be harvested as agricultural produce or sold as biological assets?


  Consumable biological assets
• Examples of consumable biological assets

  1. livestock intended for production of meat
  2. livestock held for sale
  3. fish in farms
  4. crops such as maize and wheat
  5. produce on a bearer plant and trees being grown for lumber
• Bearer biological assets are those other than consumable bio asset, held to bear produce
• A bearer plant is a living plant that

  1. Used in the production or supply of agricultural produce
  2. expected to bear produce for more than one period
  3. has a remote likelihood of being sold as agricultural produce except for incidental scrap sales
• Bearer plants and their agricultural produce

  
• Plants that are not bearer plant

  1. plants cultivated to be harvested as agricultural produce e.g trees for use as lumbers
  2. plants cultivated to produce agricultural produce but there is a likelihood to be sold as agricultural produce
  3. annual crops, e.g maize and wheat
• a biological asset shall be measured on initial recognition and at the end at its fair value less cost to sell
• It is the incremental costs directly attributable to disposal of the asset, excluding finance cost and income taxes


  Cost to sell
• Items included in cost to sell

  1. Commission to brokers and dealers
  2. levies by regulatory agencies
  3. commodity exchanges;
  4. and transfer taxes and duties
• PFRS 13 is applies in determining the fair value
• Characteristic of asset to be taken account in measuring FV;

  1. the condition and location of the asset
  2. restriction on the sale or use of the asset
• a fair value measurement assumes that the transaction to sell the asset takes place either;

  1. principal market of the asset
  2. in the most advantageous market for the asset
• Fair Value Hierarchy

  1. Level 1 - Quoted price in active market for identical asset
  2. Level 2 - quoted price for similar assets in active market; quoted price for identical or similar in inactive market; inputs other than quoted prices that are observable for the asset
  3. Level 3 - PV of future cashflows from the asset
• A quoted price in an active market provides the most reliable evidence of FV and shall be use without adjustment to measure FV whenever available
• If FV cannot be measured reliably, Biological Asset is measured at cost less depreciation less impairment losses
• Agricultural produce harvested from an entity's biological asset shall be measured at FV less cost to sell at the point of harvest
• price changes - same age, different date

  physical changes - different age, same date