Inability to measure fair value reliably
There is a presumption that fair value can be measured reliably for a
biological asset. However, that presumption can be rebutted only on initial recognition for a biological asset for which quoted market prices are not available and for which alternative fair value measurements are determined to be clearly unreliable. In such a case, that biological asset shall be measured at its cost less any accumulated depreciation and any accumulated impairment losses. Once the fair value of such a biological asset becomes reliably measurable, an entity shall measure it at its fair value less costs to sell. Once a non-current biological asset meets the criteria to be classified as held for sale (or is included in a disposal group that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, it is presumed that fair value can be measured reliably.
The presumption in paragraph 30 can be rebutted only on initial recognition. An entity that has previously measured a biological asset at its fair value less costs to sell continues to measure the biological asset at its fair value less costs to sell until disposal.
In all cases, an entity measures agricultural produce at the point of harvest at its fair value less costs to sell. This Standard reflects the view that the fair value of agricultural produce at the point of harvest can always be measured reliably.
In determining cost, accumulated depreciation and accumulated impairment
losses, an entity considers IAS 2, IAS 16 and IAS 36 Impairment of Assets.
An unconditional government grant related to a biological asset
measured at its fair value less costs to sell shall be recognised in profit or loss when, and only when, the government grant becomes receivable.
If a government grant related to a biological asset measured at its fair value less costs to sell is conditional, including when a government grant requires an entity not to engage in specified agricultural activity, an entity shall recognise the government grant in profit or loss when, and only when, the conditions attaching to the government grant are met.
Terms and conditions of government grants vary. For example, a grant may require an entity to farm in a particular location for five years and require the entity to return all of the grant if it farms for a period shorter than five years. In this case, the grant is not recognised in profit or loss until the five years have passed. However, if the terms of the grant allow part of it to be retained according to the time that has elapsed, the entity recognises that part in profit or loss as time passes.
If a government grant relates to a biological asset measured at its cost less any accumulated depreciation and any accumulated impairment losses (see paragraph 30), IAS 20 is applied.
This Standard requires a different treatment from IAS 20, if a government grant relates to a biological asset measured at its fair value less costs to sell or a government grant requires an entity not to engage in specified agricultural activity. IAS 20 is applied only to a government grant related to a biological asset measured at its cost less any accumulated depreciation and any accumulated impairment losses.
An entity shall disclose the aggregate gain or loss arising during the
current period on initial recognition of biological assets and agricultural produce and from the change in fair value less costs to sell of biological assets.
An entity shall provide a description of each group of biological assets.
The disclosure required by paragraph 41 may take the form of a narrative or quantified description.
An entity is encouraged to provide a quantified description of each group of biological assets, distinguishing between consumable and bearer biological assets or between mature and immature biological assets, as appropriate. For example, an entity may disclose the carrying amounts of consumable biological assets and bearer biological assets by group. An entity may further divide those carrying amounts between mature and immature assets. These distinctions provide information that may be helpful in assessing the timing of future cash flows. An entity discloses the basis for making any such distinctions.
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, and trees being grown for lumber. Bearer
biological assets are those other than consumable biological assets; for example, livestock from which milk is produced, grape vines, fruit trees, and trees from which firewood is harvested while the tree remains. Bearer biological assets are not agricultural produce but, rather, are self-regenerating.
Biological assets may be classified either as mature biological assets or immature biological assets. Mature biological assets are those that have attained harvestable specifications (for consumable biological assets) or are able to sustain regular harvests (for bearer biological assets).
If not disclosed elsewhere in information published with the financial
statements, an entity shall describe:
the nature of its activities involving each group of biological
non-financial measures or estimates of the physical quantities of:
each group of the entity's biological assets at the end of the
output of agricultural produce during the period.
An entity shall disclose:
the existence and carrying amounts of biological assets whose title is restricted, and the carrying amounts of biological assets pledged as
security for liabilities;
the amount of commitments for the development or acquisition of
biological assets; and
financial risk management strategies related to agricultural activity.
An entity shall present a reconciliation of changes in the carrying
amount of biological assets between the beginning and the end of the
current period. The reconciliation shall include:
the gain or loss arising from changes in fair value less costs to sell;
increases due to purchases;
decreases attributable to sales and biological assets classified as
held for sale (or included in a disposal group that is classified as held
for sale) in accordance with IFRS 5;
decreases due to harvest;
increases resulting from business combinations;
net exchange differences arising on the translation of financial
statements into a different presentation currency, and on the translation of a foreign operation into the presentation currency
of the reporting entity; and
The fair value less costs to sell of a biological asset can change due to both physical changes and price changes in the market. Separate disclosure of physical and price changes is useful in appraising current period performance and future prospects, particularly when there is a production cycle of more than one year. In such cases, an entity is encouraged to disclose, by group or otherwise, the amount of change in fair value less costs to sell included in profit or loss due to physical changes and due to price changes. This information is generally less useful when the production cycle is less than one year (for example, when raising chickens or growing cereal crops).
Biological transformation results in a number of types of physical change—growth, degeneration, production, and procreation, each of which is observable and measurable. Each of those physical changes has a direct relationship to future economic benefits. A change in fair value of a biological asset due to harvesting is also a physical change.
Agricultural activity is often exposed to climatic, disease and other natural risks. If an event occurs that gives rise to a material item of income or expense, the nature and amount of that item are disclosed in accordance with IAS 1 Presentation of Financial Statements. Examples of such an event include an outbreak
of a virulent disease, a flood, a severe drought or frost, and a plague of insects.
Additional disclosures for biological assets where fair
value cannot be measured reliably
If an entity measures biological assets at their cost less any accumulated
depreciation and any accumulated impairment losses (see paragraph 30) at the end of the period, the entity shall disclose for such biological
a description of the biological assets;
an explanation of why fair value cannot be measured reliably;
if possible, the range of estimates within which fair value is highly
likely to lie;
the depreciation method used;
the useful lives or the depreciation rates used; and
the gross carrying amount and the accumulated depreciation
(aggregated with accumulated impairment losses) at the beginning and end of the period.
If, during the current period, an entity measures biological assets at their cost less any accumulated depreciation and any accumulated impairment losses (see paragraph 30), an entity shall disclose any gain or loss recognised on disposal of such biological assets and the reconciliation required by paragraph 50 shall disclose amounts related to such biological assets separately. In addition, the reconciliation shall include the following amounts included in profit or loss related to those
reversals of impairment losses; and
If the fair value of biological assets previously measured at their cost less
any accumulated depreciation and any accumulated impairment losses becomes reliably measurable during the current period, an entity shall
disclose for those biological assets:
a description of the biological assets;
an explanation of why fair value has become reliably measurable;
the effect of the change.
An entity shall disclose the following related to agricultural activity
covered by this Standard:
the nature and extent of government grants recognised in the
unfulfilled conditions and other contingencies attaching to
government grants; and
significant decreases expected in the level of government grants.
Effective date and transition
This Standard becomes operative for annual financial statements covering periods beginning on or after 1 January 2003. Earlier application is encouraged. If an entity applies this Standard for periods beginning before 1 January 2003, it shall disclose that fact.
This Standard does not establish any specific transitional provisions. The adoption of this Standard is accounted for in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
Paragraphs 5, 6, 17, 20 and 21 were amended and paragraph 14 deleted by Improvements to IFRSs issued in May 2008. An entity shall apply those
amendments prospectively for annual periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact.
IFRS 13, issued in May 2011, amended paragraphs 8, 15, 16, 25 and 30 and deleted paragraphs 9, 17-21, 23, 47 and 48. An entity shall apply those amendments when it applies IFRS 13.
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