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Contents
34.2 Agriculture – recognition and measurement.
34.2.1 Extract from FRS102: Section 34.2-.34.3B.
34.2.2.1 The meaning of biological assets and examples.
34.2.2.1.1 Agricultural activity defined.
34.2.2.1.1.1 Requirements for biological transformation.
34.2.2.1.1.2 Requirements for biological transformation to be managed.
34.2.2.1.2 Biological asset defined.
34.2.2.2 Recognition criteria.
34.2.2.3 Accounting for agricultural produce within the scope of Section 34.
34.2.2.4 Items excluded from the definition of agriculture.
34.2.2.5 Accounting policy choices:
34.2.2.5.3 Accounting policy choice by class.
34.2.2.6 Accounting for agricultural produce after point of harvest.
34.3 Measurement – fair value model.
34.3.1 Extract from FRS102: Section 34.4-.34.6A.
34.3.2.1 Initial and subsequent recognition.
34.3.2.2. Fair value hierarchy model.
34.3.2.2.1 Active market defined.
34.3.2.2.1.1. What market to use where there is more than one market and markets in other locations.
34.3.2.2.1.1.1 More than one market to sell the produce.
34.3.2.2.1.1.2 Market in different locations.
34.3.2.2.1.1.3 Use of cash flow model to determine fair value.
34.3.2.3 Application of the fair value model.
34.3.2.4 Fair values cannot be reliably measured.
34.5 Disclosures – fair value model.
34.5.1 Extract from FRS102: Section 34.7-34.7B.
34.5.2.2.1 Extract from accounting policies note for forestry.
34.5.2.2.2 Extract from accounting policies note for livestock (Extracted from Appendix to IAS 41).
34.5.2.3 Critical accounting estimates and judgments disclosure.
34.5.2.4 Notes to financial statements.
34.7 Measurement – cost model.
34.7.1 Extract from FRS102: Section 34.8-34.9.
34.7.2.1 Initial and subsequent measurement/
34.7.2.2 Choices when applying the cost model to agricultural produce.
34.8 Disclosures – cost model.
34.8.1 Extract from FRS102: Section 34.10-34.9.
34.8.2.3 Notes to the financial statements.
34.9.1 Extract from FRS102: Section 34.11-.34.11C.
34.10 Service Concession Arrangements.
34.10.1 Extract from FRS102: Section 34.12-.34.16A.
34.10.2.2 Service conditions arrangements defined.
34.10.2.2.1 Conditions that must apply.
34.11.1 Extract from FRS102: Section 34.17-.34.33.
34.11.2.2 Financial institution defined.
34.12 Retirement Benefit Plans: Financial Statements.
34.12.1 Extract from FRS102: Section 34.34-.34.48.
34.12.2.2 Full set of financial statements.
34.13.1 Extract from FRS102: Section 34.49-.34.56.
34.13.2.1 Heritage asset – defined.
34.13.2.2 Recognition and measurement.
34.13.2.3 What about old heritage assets where there are no records to determine cost.
34.13.2.4 Where should heritage assets be disclosed on the balance sheet.
34.13.2.5.1 Possible reasons for impairment.
34.13.2.6 Useful life and residual value.
34.13.2.7 Heritage assets received free of charge.
34.13.2.8.2 Illustration of some of the disclosure requirements for heritage assets.
34.14.1 Extract from FRS102: Section 34.57-.34.63 and Appendix A to Section 34.
34.15 Public benefit entities: Incoming Resources from Non-Exchange Transactions.
34.15.1 Extract from FRS102: Section PBE34.64-.PBE34.74 and Appendix B to Section 34.
34.15.2.1 Public benefit entity defined.
34.15.2.1.1 Requirement to disclose that an entity is a public benefit entity.
34.15.2.2 Special rules for public benefit entities.
34.15.2.2.1 Assets held for provision of social benefits.
34.15.2.2.2 Income resources from non-exchange transactions.
34.15.2.2.2.2 Accounting for non-exchange accounting.
34.15.2.2.2.2.1 Recognition for goods and measurement for goods.
34.15.2.2.2.2.1.1 Performance related conditions defined.
34.15.2.2.2.2.1.2 Conditions that are not performance related.
34.15.2.2.2.2.1.3 Examples of non-exchange resource transactions received in the form of goods.
34.15.2.2.2.2.2 Non-exchange resources received in the form of services/facilities.
34.15.2.2.2.2.2.2 Recognition and measurement.
34.15.2.2.2.2.2.2.1 Examples of non-exchange Transactions where services/facilities provided.
34.15.2.2.3 Public benefit entity combinations.
34.15.2.2.3.1.1 Business combinations defined.
34.15.2.2.3.2 Accounting Requirements.
34.15.2.2.3.2.1 Gift of a business for nil or nominal consideration.
34.15.2.2.3.2.1.1 Example of business combinations which is a gift that is not a merger.
34.15.2.2.3.2.1.2 Disclosures.
34.15.2.2.3.2.2 Examples illustrating merger accounting.
34.15.2.2.3.2.3 Meets the definition of a true acquisition and the purchase method applies.
34.15.2.2.3.2.3.1 Example business combination: Not a merger or gift – Purchase accounting method.
34.15.2.2.4 Public benefit concessionary loans.
34.15.2.2.4.2 Public benefit entity loan defined.
34.15.2.2.4.3 Accounting treatment of public benefit concessionary loans choices. 4
34.15.2.2.4.5 Examples of concessionary loans.
34.15.2.2.5 Government grants and accounting requirements.
34.15.2.2.5.1.1 Grants of all natures – Performance model.
34.15.2.2.5.1.2 Accrual model FRS 102 only.
34.15.2.2.5.2 Example of government grant accounting of PBE’S.
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34.2 Agriculture – recognition and measurement
34.2.1 Extract from FRS102: Section 34.2-.34.3B
34.2 An entity that is engaged in agricultural activity shall determine an accounting policy for each class of biological asset and its related agricultural produce.
Recognition
34.3 An entity shall recognise a biological asset or an item of agricultural produce when, and only 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.
Measurement
34.3A For each class of biological asset and its related agricultural produce an entity shall choose as its accounting policy either:
(a) the fair value model set out in paragraphs 34.4 to 34.7B; or
(b) the cost model set out in paragraphs 34.8 to 34.10A.
34.3B If an entity has chosen the fair value model for a class of biological asset and its related agricultural produce, it shall not subsequently change its accounting policy to the cost model.
34.2.2 OmniPro comment
34.2.2.1 The meaning of biological assets and examples
34.2.2.1.1 Agricultural activity defined
Appendix I of FRS 102 defines agricultural activity as ‘the management by an entity of the biological assets for sale, into agricultural produce or into additional biological assets’. It covers a wide range of activities, such as raising livestock, forestry, annual or perennial cropping, cultivating orchards and plantations, floriculture, and aquaculture (including fish farming).
34.2.2.1.1.1 Requirements for biological transformation
In order to come within the definition of agricultural activity there must be a biological transformation which is managed. Biological transformation is where biological assets grow etc. For example, lambs are born and then reared to maturity as a sheep/ewe, which is then sold as lamb etc. Forestry grows throughout its life.
34.2.2.1.1.2 Requirements for biological transformation to be managed
This biological transformation process must be actively managed e.g. feeding cattle, sheep, arranging for those animal to reproduce.
34.2.2.1.2 Biological asset defined
A biological asset is ‘a living animal or plant’; and agricultural produce is ‘the harvested product of the entity’s biological assets’, as per appendix 1 of FRS 102
34.2.2.1.3 Example of biological, agricultural products and products that are the result of processing after harvest
Example of biological assets, agricultural products and products that are the result of processing after harvest include (as extracted from IAS 41.4):
| Biological assets | Agricultural produce | Products that are the result of processing after harvest |
| Sheep | Wool | Carpet, Yarn |
| Dairy cattle | Milk | Cheese |
| Pigs | Carcass | Sausages etc |
| Bushes plants | Leaf | Tea, Tobacco |
| Trees in plantation of forest | Felled Trees | Logs, Timber |
| Plants | Cotton, Harvest Cane | Thread, Clothing, Sugar |
| Beef cattle | Carcass | Beef etc |
| Vines | Grapes | Wine |
| Fruit trees | Picked Fruit | Processed Fruit |
34.2.2.2 Recognition criteria
The recognition criteria for biological assets as per Section 34.3 of FRS 102 is similar to any other asset, there must be:
- Ownership of the asset and have ability to control it
- Probable future economic activities will flow to the entity
- The fair value or cost can be reliably measured.
34.2.2.3 Accounting for agricultural produce within the scope of Section 34
Section 34 only applies to agricultural produce (i.e. harvested crops) at the point of harvest and not prior to or subsequent to harvest as stated in Section 34.5 of FRS 102. Unharvested produce is considered to form part of the biological asset e.g. wool which has not been extracted from a sheep cannot be valued separately.
34.2.2.4 Items excluded from the definition of agriculture
Land and agricultural property including roads do not come within this section as these are dealt with by Section 17 of FRS 102.
34.2.2.5 Accounting policy choices:
34.2.2.5.1 The choices
The accounting policy choices available as per Section 34.3A of FRS 102 are:
34.2.2.5.2 Consistency of accounting policy and inability to change from a fair value model to a cost model
An entity must apply the policy chosen consistently and cannot change, where there is a change it is a change in accounting policy and would require retrospective adjustment.
34.2.2.5.3 Accounting policy choice by class
A different accounting policy can be determined for each biological class as stated in Section 34.3A of FRS 102 i.e. a cost method could be applied to sheep and a fair value model applied to cattle etc.
34.2.2.6 Accounting for agricultural produce after point of harvest
It is clear from Section 13.2 of FRS 102 that agricultural produce after point of harvest is not within the remit of Section 34, instead these come within the remit of Section 13 Inventories.
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Examples
Example 2: Application of the fair value model com.
Example 3: Application of the fair value model – livestock.
Example 4: Biological Assets held at fair value.
Example 5: Extract from notes to the financial statements for biological assets held at fair value.
Example 6: Extract from accounting policies notes for livestock/biological assets carried at cost.
Example 14: Donated goods or services – fixed assets.
Example 15: Donated goods or services – donated goods held for resale – impractical to measure.
Example 16: Donated goods or services – donated goods held for resale – practical to measure.
Example 18: Donated goods or services – donated services.
Example 19: Business Combinations: Gifts of business etc.
Example 20: Business Combinations: Mergers.
Example 21: Concessionary loans – option not to discount.
Example 22: Concessionary loans – option to discount.
Example 24: Accruals model (applicable for FRS 102 only and not Charities SORP) – capital grant.
Example 25: Accruals model (applicable for FRS 102 only and not Charities SORP) – revenue grant.
Example 26: Accruals model (applicable for FRS 102 only and not Charities SORP) – revenue grant.
Example 27: Performance model (applicable for FRS 102 and Charities SORP) – revenue grant.
Example 28: Performance model – Revenue Grant.
Example 29: Capital grants (FRS 102 and FRS 102 SORP – performance model).
Example 30: Grants and performance conditions.
Example 31: Grants and performance conditions.
Example 32: Grants and performance conditions.
Example 33: Grants and performance conditions.
Example 34: Grants and performance conditions.
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