IAS 16 Property, Plant and Equipment & 41 Agriculture
By Panicos Charalambous, FCCA, Director PKC Quality Training Ltd, Director-Professional Studies at P. Stylianides Institute of Accountancy
IAS 16 Property, Plant and Equipment & 41 Agriculture (amendments to IAS 16 and IAS 41 effective for annual periods beginning on or after 1 January 2016)
This article presents the amendments to IAS 16 and IAS 41 in relation to bearer plants. An entity shall apply those amendments for annual periods beginning on or after 1 January 2016. Earlier application is permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact. An entity shall apply those amendments retrospectively in accordance with IAS 8.
IAS 41 Agriculture
1 This Standard shall be applied to account for the following when they relate to agricultural activity:
- biological assets except for bearer plants;
- agricultural produce at the point of harvest; and
- government grants covered by paragraphs 34 and 35.
2 This Standard does not apply to:
(a) land related to agricultural activity (see IAS 16 Property, Plant and Equipment and IAS 40 Investment Property);
(b) bearer plants related to agricultural activity (see IAS 16). However, this standard applies to the produce on those bearer plants;
(c) government grants related to bearer plants (see IAS 20);
(b) intangible assets related to agricultural activity (see IAS 38 Intangible Assets).
3 This Standard is applied to agricultural produce, which is the harvested produce product of the entity’s biological assets, only at the point of harvest. Thereafter, IAS 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|
|Trees in a timber plantation forest||Felled trees||Logs, lumber|
|Products that are the result of processing after harvest|
|Pigs||Carcass||Sausages, cured hams|
|Harvested cotton||Thread, clothing|
|Tobacco plants Bushes||Picked leaves Leaf||Tea, Cured tobacco|
|Tea bushes||Picked leaves||Tea|
|Grape Vvines||Picked Ggrapes||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 IAS 16. However, the produce growing on bearer plants for example, tea leaves, grapes, oil palm fruit and latex, is within the scope of IAS 41.
5 Agriculture related definitions
- A biological asset is a living animal or plant.
- Government grants are as defined in IAS 20.
– 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
5A The following are not bearer plants:
- plants cultivated to be harvested as agricultural produce (for example trees grown for use as timber)
- 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
- 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.
- 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).
- 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 agriculture produce but rather, are held to bear produce.
- In the reporting period when Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) is first applied an entity need not disclose the quantitative information required by paragraph 28(f) of IAS 8 for the current period. However, an entity shall present the quantitative information required by paragraph 28(f) of IAS 8 for each prior period presented.
IAS 16 Property, Plant and Equipment
Biological assets that meet the definition of “bearer plants” are now measured either at cost or revalued amounts, less accumulated depreciation and impairment losses under IAS 16.
- This standard does not apply to:
- a) ….
- b) biological assets related to agricultural activity other than bearer plants. This standard applies to bearer plants but it does not apply to the produce on bearer plants.
22A Bearer plants are accounted for in the same way as self-constructed items of property, plant and equipment, before they are in the location and condition necessary to be capable of operating in the manner intended by management. Consequently, references to “construction” in this Standard should be read as covering activities that are necessary to cultivate the bearer plants before they are in the location and condition necessary to be capable in the manner intended by management.
80B. In the reporting period when Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) is first applied an entity need not disclose the quantitative information required by paragraph 28(f) of IAS 8 for the current period. However, an entity shall present the quantitative information required by paragraph 28(f) of IAS 8 for each prior period presented.
80C. An entity may elect to measure an item of bearer plants at its fair value at the beginning of the earliest period presented in the financial statements for the reporting period in which the entity first applies Agriculture; Bearer plants (Amendments to IAS 16 and IAS 41) and use that fair value as its deemed cost at that date. Any difference between the previous carrying amount and fair value shall be recognized in opening retained earnings at the beginning of the earliest period presented.