explanation of significant events and transactions and changes in financial position in
the period should be more detailed than the update normally expected in IAS 34.
[IAS 34.15]. In the absence of any specific regulatory requirements to which the entity is
subject, the following are examples of additional considerations that would apply:
• since it is not possible to make a statement that the same accounting policies and
methods of computation have been applied, [IAS 34.16A(a)], the entity should
disclose all those accounting policies and methods of computation in the same
level of detail as it would in a set of annual financial statements. When the entity
issues interim reports on a quarterly basis, the first quarter interim report should
provide the abovementioned details; subsequent quarterly reports could refer to
the details included in the first quarter report;
• similarly, the disclosure of the nature and amount of changes in estimates of
amounts reported in prior periods will have to go into more detail than just the
changes normally required to be disclosed; [IAS 34.16A(d)]
• mere disclosure of transfers between levels of the fair value hierarchy used in
measuring the fair value of financial instruments, [IAS 34.15B(k)], would not be
meaningful unless put in the context of how those fair values are determined (e.g.
methods used, any assumptions applied) and providing a detailed classification of
Interim financial reporting 3125
all such financial instrument measurements using fair value hierarchy, based on
the significance of the inputs used;
• rather than disclosing changes in the basis of segmentation or in the basis of
measurement of segment profit and loss, [IAS 34.16A(g)(v)], a full description will be
necessary, as will the disclosure of segment assets and liabilities, [IAS 34.16A(g)(iv)],
where such information is required to be disclosed in the annual financial
statements; [IAS 34.16A(g)]
• more extensive disclosure than simply the changes since the last report date will
be required for contingent liabilities and contingent assets; [IAS 34.15B(m)] and
• in the absence of a complete set of annual financial statements complying with
IFRS, the entity should include each of the headings and subtotals in the
condensed financial statements that it would expect to include in its first financial
statements prepared under IFRS.
Entities that have converted from local GAAP to IFRS and have not yet presented IFRS
annual financial statements are subject to additional requirements under IFRS 1 – First-time
Adoption of International Financial Reporting Standards – when presenting interim reports
in accordance with IAS 34. Such requirements are discussed in detail in Chapter 5 at 6.6.
11.2 Consequential amendments to IFRS 7 when first adopting IFRS 9
IFRS 7 requires specific disclosures on the classification and measurement of financial
assets and financial liabilities ‘in the reporting period that includes the date of initial
application of IFRS 9’. [IFRS 7.42I]. These amendments refer to ‘the reporting period’
rather than ‘the annual period’. This begs the question whether these disclosure
requirements would need to be met in full in any interim report in the period when first
adopting IFRS 9 – Financial Instruments. In our view, the reference to ‘reporting
period’ should be interpreted as the first annual period in which IFRS 9 is adopted. For
this reason, the nature and extent of disclosures about this change in accounting in
interim reports for that period are subject to the same judgement as applied for other
changes (see 4.2 above).
The transitional arrangements for the adoption of IFRS 9 are discussed in Chapter 44 at 10.
References
1
IFRIC Update, March 2014.
6 Division of Corporation Finance - Financial
2 IFRS Practice Statement 2 – Making
Reporting Manual, SEC, 1500: Interim Period
Materiality Judgements, IASB, September
Reporting Considerations (All Filings).
2017, para. 85.
7 IFRS 16, Illustrative Examples, Appendix,
3 IFRS Practice Statement 2, para. 87.
Amendments to guidance on other Standards,
4 IFRS Practice Statement 2, para. 88.
IASB, January 2016.
5
Report
-
Enforcement and Regulatory Activities
8
IFRIC Update, March 2014.
of Accounting Enforcers in 2017, ESMA,
03 April 2018, para. 63.
3126 Chapter 37
3127
Chapter 38
Agriculture
1 INTRODUCTION ........................................................................................... 3131
2 OBJECTIVE, DEFINITIONS AND SCOPE ....................................................... 3131
2.1
Objective ............................................................................................................... 3131
2.2 Definitions
............................................................................................................
3132
2.2.1
Agriculture-related definitions ........................................................ 3132
2.2.1.A
Definition of bearer plants ........................................... 3133
2.2.2
General definitions ............................................................................. 3135
2.3
Scope ..................................................................................................................... 3135
2.3.1
Biological assets outside the scope of IAS 41 ................................ 3136
2.3.2 Agricultural
produce
before and after harvest ............................. 3136
2.3.3
Bearer plants and produce growing on a bearer plant ................ 3136
2.3.4
Products that are the result of processing after harvest ............. 3137
2.3.5
Leases of biological assets (excluding bearer plants) .................. 3137
2.3.5.A
Leases of biological assets under IFRS 16 ................. 3138
2.3.5.B
Leases of biological assets under IAS 17 .................... 3138
2.3.6
Concessions ......................................................................................... 3139
3 RECOGNITION AND MEASUREMENT PRINCIPLES ..................................... 3139
3.1
Recognition .......................................................................................................... 3139
3.1.1
Control .................................................................................................. 3139
3.2
Measurement ....................................................................................................... 3140
3.2.1
Biological assets within the scope of IAS 41 ................................. 3140
3.2.1.A
Initial and subsequent measurement ......................... 3140
3.2.1.B Subsequent
expenditure
...............................................
3140
3.2.2
Agr
icultural produce .......................................................................... 3140
3.2.3
Requirements for produce growing on a bearer plant ................ 3141
3.2.3.A
Requirements for bearer plants in the scope of
IAS 16 ................................................................................ 3141
3128 Chapter 38
3.2.3.B
Requirements for agricultural produce growing
on bearer plants .............................................................. 3145
3.2.4
Gains and losses .................................................................................. 3147
3.2.5
Inability to measure fair value reliably ........................................... 3147
3.2.5.A
Rebutting the presumption .......................................... 3147
3.2.5.B
The cost model ............................................................... 3150
3.3
Government grants .............................................................................................. 3151
4 MEASURING FAIR VALUE LESS COSTS TO SELL ......................................... 3151
4.1
The interaction between IAS 41 and IFRS 13 ................................................ 3151
4.2 Establishing
what to measure ........................................................................... 3152
4.2.1
Unit of account .................................................................................... 3152
4.2.2 Grouping
of assets .............................................................................. 3152
4.3
When to measure fair value .............................................................................. 3152
4.4 Determining
costs to sell ................................................................................... 3153
4.5
Measuring fair value: IAS 41-specific requirements .................................... 3153
4.5.1
Use of external independent valuers .............................................. 3153
4.5.2
Obligation to re-establish a biological asset after harvest .......... 3153
4.5.3
Forward sales contracts ..................................................................... 3154
4.5.4 Onerous
contracts
..............................................................................
3154
4.5.5
Financing cash flows and taxation .................................................. 3155
4.6
Measuring fair value: overview of IFRS 13’s requirements ........................ 3155
4.6.1
The fair value measurement framework ....................................... 3155
4.6.2
Highest and best use and valuation premise ................................. 3155
4.6.2.A
Biological assets attached to land ............................... 3157
4.6.3
Selecting appropriate assumptions ................................................. 3160
4.6.3.A
Condition and location ................................................. 3161
4.6.4
Valuation techniques in IFRS 13 ...................................................... 3162
4.6.4.A
Cost as an approximation of fair value ...................... 3162
4.7
The problem of measuring fair value for part-grown biological
assets...................................................................................................................... 3163
5 DISCLOSURE ................................................................................................ 3165
5.1
General .................................................................................................................. 3165
5.1.1
Statement of financial position ........................................................ 3165
5.1.1.A
Current versus non-current classification ................ 3166
5.1.2
Income statement ............................................................................... 3167
5.1.3
Groups of biological assets ............................................................... 3169
5.1.4 Other
disclosures ................................................................................ 3170
5.2
Fair value measurement disclosures ............................................................... 3174
5.3
Additional disclosures if fair value cannot be measured reliably ..............3177
Agriculture
3129
5.4 Government
grants
.............................................................................................
3178
List of examples
Example 38.1:
Conditional government grants ........................................................ 3151
Example 38.2:
Assets attached to land ...................................................................... 3158
Example 38.3:
Presentation of biological assets in the statement of financial
position .................................................................................................. 3166
Example 38.4:
Physical change and price change ................................................... 3171
3130 Chapter 38
3131
Chapter 38
Agriculture
1 INTRODUCTION
IAS 41 – Agriculture – prescribes the accounting treatment for most agricultural activity,
from the initial recognition of a biological asset to the harvest of agricultural produce.
IAS 41 applies to some, but not all biological assets. In particular, IAS 41 excludes bearer
plants, as defined, from its scope. Instead, they are within the scope of IAS 16 –
Property, Plant and Equipment – and are subject to all of the requirements therein.
However, agricultural produce growing on bearer plants (e.g. fruit growing on a tree) are
within the scope of IAS 41 and are treated as biological assets.
Practical difficulties may arise when determining which assets are within the scope of
the standard, particularly for arrangements that involve leases or concessions. Entities
may also find it particularly challenging to apply two different measurement models
under two different standards to bearer plants, as defined, and the produce growing
thereon. However, it is IAS 41’s application of the fair value model that can be the most
challenging and contentious.
For assets that are in-scope, IAS 41 requires the application of the fair value model to
animals and plant life alike, with limited relief. Under this approach, a market price for an
animal or part-grown crop is presumed to exist (or is presumed to be reliably measureable
if there is no such market price) and the animal or part-grown crop must be valued at this
price in the entity’s financial statements. The fair value model is applied to all biological
assets that are in-scope, regardless of whether they are consumed as part of the
agricultural activity (consumable biological assets) or not (bearer biological assets).
This chapter discusses the requirements of IAS 41, along
with the requirements for
bearer plants under IAS 16.
2
OBJECTIVE, DEFINITIONS AND SCOPE
2.1 Objective
The stated objective of IAS 41 is to ‘prescribe the accounting treatment and disclosures
related to agricultural activity’. [IAS 41 Objective].
3132 Chapter 38
2.2 Definitions
2.2.1 Agriculture-related
definitions
IAS 41 defines agricultural activity as ‘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’. [IAS 41.5].
The standard states that ‘agricultural activity’ covers a wide range of activities, e.g.
‘raising livestock, forestry, annual or perennial cropping, cultivating orchards and
plantations, floriculture, and aquaculture (including fish farming)’. [IAS 41.6].
Nevertheless, these agricultural activities have certain common features:
‘(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.’ [IAS 41.6].
Biological transformation under IAS
41 ‘comprises the processes of growth,
degeneration, production, and procreation that cause qualitative or quantitative
changes in a biological asset’. [IAS 41.5]. The standard explains that biological
transformation results in the following types of outcomes:
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 619