5/8/2023

Agriculture
Philippine Accounting Standards (PAS) 41

Learning Objectives

• Differentiate the following: biological assets, bearer plants,

agricultural produce and inventory.
• State the initial and subsequent measurement of biological
assets and agricultural produce.
• State the accounting for government grants that are within the
scope of PAS 41.

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Objective

PAS 41 established the standards of accounting for

agricultural activity – the management of the biological
transformation of biological assets (living plants and
animals) into agricultural produce (harvested product of
the entity's biological assets).

Scope

PAS 41 is applied to account for the following when they

relate to agricultural activity:
a. Biological assets, except for bearer plants.
b. Agricultural produce at the point of harvest;
and
c. Unconditional government grants related to a
biological asset measured at its fair value less cost
to sell
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Scope
PAS 41 does not apply to the following:
a. Land (PAS 16 PPE and PAS 40 Investment Property)
b. Bearer plants related to agricultural activity (PAS 16). However, PAS
41 applies to the produce on those bearer plants.
c. Government grants related to bearer plants (PAS 20 Acctg. for Gov’t.
Grants and Disclosure of Gov’t. Assistance).
d. Intangible assets (PAS 38 Intangible Assets).

• PAS 41 is applied to agricultural produce at the point of harvest.

After the point of harvest, PAS 2 Inventories or other applicable
standard is applied.
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Definitions

• Biological asset - a living animal or plant

• Bearer plant – 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.
• Agricultural produce - the harvested product from
biological assets
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Biological Asset vs Agricultural

Produce
MOOOO!!!

LIVE COW - BIOLOGICAL ASSET

INVENTORY

INVENTORY INVENTORY 8
CARCASS - AGRICULTURAL PRODUCE

Consumable vs. Bearer

biological assets
Biological assets are either consumable or bearer.
a. Consumable - those that are to be harvested as
agricultural produce or sold as biological assets. Ex.
Timber
b. Bearer - those other than consumable biological
assets. Ex. Fruit tree
• PAS 41 applies to both consumable and bearer
animals. However, PAS 41 only to consumable
plants but not to bearer plants. 9

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Consumable Plant vs. Bearer

Plants

MAIZE PLANT – ANNUAL CROP

(CONSUMMABLE – PAS 41)
MANGO TREE 10
(BEARER PLANT – PAS 16)

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Agriculture

Nature of asset Type of asset

 Living animal or plant Biological asset (PAS 41)
However, bearer plants are
classified as Property, Plant and
Equipment (PAS 16)
 Unprocessed harvested Agricultural produce
product (PAS 41)

 Processed harvested Inventory (PAS 2)

product 11

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Agricultural activity

• PAS 41 applies to biological assets, agricultural produce

and gov’t. grants only when they relate to agricultural
activity.
• Agricultural activity is the management by an
entity of the biological transformation of biological
assets for sale, into agricultural produce, or into
additional biological assets.

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Common features of
agricultural activity
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 stabilizing,
conditions necessary for the process to take place.
• Harvesting from unmanaged sources is not agricultural activity.

c. Measurement of change – The change in quality or

quantity brought about by biological transformation is
measured and monitored as a routine management
function.
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Recognition

A biological asset or agricultural produce is recognized

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.
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Measurement

• 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.
• 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 PAS
2 Inventories or another applicable standard.

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Measurement

• A biological asset is measured at cost less accumulated

depreciation and accumulated impairment loss if the
fair value of the biological asset cannot be measured
reliably on initial recognition.

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Definitions
• 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.

• Costs to sell are the incremental costs directly attributable to the disposal
of an asset, excluding finance costs and income taxes (e.g., Commissions
to brokers, Levies by regulatory agencies and commodity exchanges, and
Transfer taxes and duties)
• Costs to sell do not include transport costs, advertising costs, income
taxes, and interest expense.
• If location is a characteristic of the biological asset, the price in the
principal (or most advantageous) market shall be adjusted for the
transport costs. 17

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Gains and losses

• 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.

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Government Grants

Nature of government grant Accounting procedure

 Government grant  Recognize income equal to fair value of
(a) is unconditional and the grant when the grant becomes
(b)relates to biological asset measured receivable.
at FVLCS

 Government grant is conditional  Recognize income only when condition is

met.
 Government grant relates to biological  Account for the grant under PAS 20
asset measured at cost
 Government grant is conditional but a  Recognize income using straight-line
portion of the grant is retained according method
to the time that has elapsed
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Encouraged disclosures
Disclosure of the following information is encouraged but not required:
1. Disclosure of consumable and bearer biological assets.
2. Disclosure of mature and immature biological assets.
a. Mature biological assets are those that have attained harvestable
specifications or are able to sustain regular harvests.
b. Immature biological assets are those that have not yet attained harvestable
specifications or are not yet able to sustain regular harvests.

3. Disclosure of breakdown of total “Gain (loss) from changes in FVLCS”

during the period attributable to price change and physical change

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