Written Report Dimalibot, Danica A.
PAS 41 - AGRICULTURE
Objective of PAS 41
The objective of PAS 41 is to establish standards of accontin! for a!ricltral activit" -- the mana!ement of the biolo!ical transformation of biolo!ical assets #livin! plants and animals$ into a!ricltral prodce #harvested prodct of the enterprise%s biolo!ical assets$.
Scope of PAS 41 on Agriculture •
PAS 41 shall be applied to accont for the follo&in! &hen the" relate to a!ricltral activit"' ▫
▫
▫
•
•
(iolo!ical assets A!ricltral prodce )overnment !rant related to a biolo!ical asset
PAS 41 is applied to a!ricltral prodce AT T*+ PT / *AR0+ST. Thereafter, PAS on inventories shall be applied. PAS 41 does T deal &ith processin! of a!ricltral prodce A/T+R *AR0+ST.
Ke !efinition"#
A biologic$l $""et is $""et is a livin! animal or plant. Agricultur$l Agricultur$l pro%uce is pro%uce is the harvested prodct of the entit"2s biolo!ical assets. &$rve"t is the detach detachmen mentt of prod prodce ce from from a biolo! biolo!ica icall asse assett or the cessati cessation on of a biolo!ical asset2s life processes.
'iologic$l A""et Sheep Trees in a plantation forest Plants Dair" cattle Pi!s (shes 0ines /rit trees
Agricultur$l Pro%uce Wool o!s
Pro%uct" t($t $re t(e re"ult of proce""ing $fter ($rve"t 3arn, carpet mber
5otton, harvested cane 6il7 5arcass eaf )rapes Pic7ed frit
Thread, clothin!, s!ar 5heese Sasa!es, cred hams Tea, cred tobacco Wine Processed frit
Agricultur$l $ctivit is the mana!ement b" an entit" of the biolo!ical transformation of biolo!ical assets for sale, into a!ricltral prodce, or into additional biolo!ical assets. 8
+9ample' Raisin! livestoc7, /loricltre, A:acltre
'iologic$l tr$n"for)$tion comprises the processes of !ro&th, de!eneration, prodction, and procreation that case :alitative or :antitative chan!es in a biolo!ical asset. 8
+9ample' Prodction of a!ricltral prodce sch as late9, tea, leaf, &ool and mil7.
Initi$l Recognition An enterprise shold reco!ni;e a biolo!ical asset or a!ricltre prodce onl" &hen the enterprise controls the asset as a reslt of part events, it is probable that ftre economic benefits &ill flo& to the enterprise, and the fair vale or cost of the asset can be measred reliabl".
*e$"ure)ent (iolo!ical assets shold be measred on initial reco!nition and at sbse:ent reportin! dates at fair vale less estimated point-of-sale costs, nless fair vale cannot be reliabl" measred.
A!ricltral prodce shold be measred at fair vale less estimated point-of-sale costs at the point of harvest. (ecase harvested prodce is a mar7etable commodit", there is no %measrement reliabilit"% e9ception for prodce.
The !ain on initial reco!nition of biolo!ical assets at fair vale, and chan!es in fair vale of biolo!ical assets drin! a period, are reported in net profit or loss.
A !ain on initial reco!nition of a!ricltral prodce at fair vale shold be inclded in net profit or loss for the period in &hich it arises.
All costs related to biolo!ical assets that are measred at fair vale are reco!ni;ed as e9penses &hen incrred, other than costs to prchase biolo!ical assets.
PAS 41 presmes that fair vale can be reliabl" measred for most biolo!ical assets. *o&ever, that presmption can be rebtted for a biolo!ical asset that, at the time it is initiall" reco!ni;ed in financial statements, does not have a :oted mar7et price in an active mar7et and for &hich other methods of reasonabl" estimatin! fair vale are determined to be clearl" inappropriate or n&or7able. n sch a case, the asset is measred at cost less accmlated depreciation and impairment losses. (t the enterprise mst still measre all of its other biolo!ical assets at fair vale. f circmstances chan!e and fair vale becomes reliabl" measrable, a s&itch to fair vale less point-of-sale costs is re:ired.
PAS 41 "et" out "ever$l +$" of )e$"uring f$ir v$lue# •
<oted mar7et price in an active mar7et
•
6ost recent transaction price
•
6ar7et price for similar asset &ith adjstment to reflect an" differences
•
Sector benchmar7, sch as vale of a farmland per hectare or vale of cattle per 7ilo!ram
•
Present vale of e9pected net cash flo&s from the asset
E,A*PLE# *e$"ure)ent of -$ir .$lue AT45 5ompan" has a herd of 1= t&o-"ear-old animals &as held at >anar" 1, =1?. ne animal, a!ed .@ "ears, &as prchased on >l" 1, =1? for ₱ 1=, and one animal &as born on >l" 1, =1?. o animals &ere sold or disposed of drin! the period. Per nit fair vales less estimated point-of-sale costs &ere as follo&s' ₱
-"ear-old animal at >anar" 1
1==
e&born animal at >l" 1
B=
.@-"ear-old animal at >l" 1
1=
e&born animal at December C1
B
=.@-"ear-old animal at December C1
=
-"ear-old animal at December C1
1=@
.@-"ear-old animal at December C1
111
C-"ear-old animal at December C1
1=
(efore separatin! the ph"sical chan!es and the price chan!e, it is sefl to e9amine the overall movement in the valation of the herd drin! =1?. /0 less estimated point-of-sale costs of herd at >anar" 1, =1?' #1= 9 ₱ 1==$ Prchased on >l" 1, =1?' #1 9 ₱1=$
₱1,===
1= ₱1,1=
/0 less estimated point-of-sale costs of herd at December C1 , =1?' 11 9 ₱1= 1 9 ₱=
₱1,C=
= ₱1,4==
Therefore the movement in valation drin! the period is ₱ # ₱ 1,4== - ₱ 1,1=$.
ncrease in fair vale less estimated point-of-sale costs de to price chan!e'
1= 9 #₱1=@ E ₱1==$
₱@=
1 9 #₱111 E ₱1=$
C
1 9 #₱B E ₱B=$
₱@@
ncrease in fair vale less estimated point-of-sale costs de to ph"sical chan!e'
1= 9 #₱1= E ₱1=@$
₱1@=
1 9 #₱1= E ₱111$
1 9 #₱= E ₱B$
1 9 ₱B=
B= CB ₱
TREAT*E/T -OR GO.ER/*E/T GRA/T 8
An nconditional !overnment !rant related to a biolo!ical asset measred at its fair vale less costs to sell shall be reco!ni;ed in profit or loss &hen, and onl" &hen, the !overnment !rant becomes receivable.
8
f a !overnment !rant related to a biolo!ical asset measred at its fair vale less costs to sell is conditional, incldin! &hen a !overnment !rant re:ires an entit" not to en!a!e in specified a!ricltral activit", an entit" shall reco!ni;e the !overnment !rant in profit or loss &hen, and onl" &hen, the conditions attachin! to the !overnment !rant are met.
8
f a !overnment !rant relates to a biolo!ical asset measred at its cost less an" accmlated depreciation and an" accmlated impairment losses, PAS = on !overnment !rant is applied.
Ot(er I""ue"
a. The chan!e in fair vale of biolo!ical assets is part ph"sical chan!e #!ro&th, etc.$ and part nit price chan!e. Separate disclosre of the t&o components is encora!ed, not re:ired. b. /air vale measrement stops at harvest. PAS , nventories, applies after harvest. c. A!ricltral land is acconted for nder PAS 1?, Propert", Plant and +:ipment. *o&ever, biolo!ical assets that are ph"sicall" attached to land are measred as biolo!ical assets separate from the land.
d. ntan!ible assets relatin! to a!ricltral activit" #for e9ample, mil7 :otas$ are acconted for nder PAS C, ntan!ible Assets. e. Fnconditional !overnment !rants received in respect of biolo!ical assets measred at fair vale are reported as income &hen the !rant becomes receivable.
!i"clo"ure" Disclosre re:irements in PAS 41 inclde' • • • • •
• • • • •
5arr"in! amont of biolo!ical assets Description of an enterprise%s biolo!ical assets, b" broad !rop 5han!e in fair vale drin! the period /air vale of a!ricltral prodce harvested drin! the period Description of the natre of an enterprise%s activities &ith each !rop of biolo!ical assets and non-financial measres or estimates of ph"sical :antities of otpt drin! the period and assets on hand at the end of the period nformation abot biolo!ical assets &hose title is restricted or that are pled!ed as secrit" 5ommitments for development or ac:isition of biolo!ical assets /inancial ris7 mana!ement strate!ies 6ethods and assmptions for determinin! fair vale Reconciliation of chan!es in the carr"in! amont of biolo!ical assets, sho&in! separatel" chan!es in vale, prchases, sales, harvestin!, bsiness combinations, and forei!n e9chan!e differences
Disclosre of a :antified description of each !rop of biolo!ical assets, distin!ishin! bet&een consmable and bearer assets or bet&een matre and immatre assets, is encora!ed bt not re:ired. f fair vale cannot be measred reliabl", additional re:ired disclosres inclde' • • • • • • •
Description of the assets An e9planation of the circmstances f possible, a ran!e &ithin &hich fair vale is hi!hl" li7el" to fall )ain or loss reco!ni;ed on disposal Depreciation method Fsefl lives or depreciation rates )ross carr"in! amont and the accmlated depreciation, be!innin! and endin!
f the fair vale of biolo!ical assets previosl" measred at cost no& becomes available, certain additional disclosres are re:ired. Disclosres relatin! to !overnment !rants inclde the natre and e9tent of !rants, nflfilled conditions, and si!nificant decreases in the e9pected level of !rants
A)en%)ent" +ffectivit"' /or annal periods be!innin! on or after >anar" 1 =1? GAS( isses amendments to AS 1? and AS 41 for bearer plants C= >ne =14 The nternational Accontin! Standards (oard #AS($ toda" pblished amendments that chan!e the financial reportin! for bearer plants, sch as !rape vines, rbber trees and oil palms. AS 41 A!ricltre crrentl" re:ires all biolo!ical assets related to a!ricltral activit" to be measred at fair vale less costs to sell. This is based on the principle that the biolo!ical transformation that
these assets nder!o drin! their lifespan is best reflected b" fair vale measrement. *o&ever, there is a sbset of biolo!ical assets, 7no&n as bearer plants, &hich are sed solel" to !ro& prodce over several periods. At the end of their prodctive lives the" are sall" scrapped. nce a bearer plant is matre, apart from bearin! prodce, its biolo!ical transformation is no lon!er si!nificant in !eneratin! ftre economic benefits. The onl" si!nificant ftre economic benefits it !enerates come from the a!ricltral prodce that it creates. The AS( decided that bearer plants shold be acconted for in the same &a" as propert", plant and e:ipment in AS 1? Propert", Plant and +:ipment, becase their operation is similar to that of manfactrin!. 5onse:entl", the amendments inclde them &ithin the scope of AS 1?, instead of AS 41. The prodce !ro&in! on bearer plants &ill remain &ithin the scope of AS 41. +ntities are re:ired to appl" the amendments for annal periods be!innin! on or after 1 >anar" =1?. +arlier application is permitted.G
