At its meeting on November 20-21, 2017, the AcSB considered further advice from its Agricultural Advisory Group on how to measure biological assets.

Cost

The Board considered how to reduce the complexity for stakeholders when determining cost of some agriculture inventories. The Board decided that, consistent with Section 3031, Inventories, the standard on Agriculture should permit:

• the use of techniques and formulas such as the standard cost and retail methods, when the results approximate cost; and
• the allocation of an agricultural producer’s costs of conversion between products on a rational and consistent basis.

The Board also decided to expose the option to measure agricultural inventories using direct costs. While full cost may provide better information to users of financial statements, the Board decided to allow agricultural producers to exclude their indirect costs to reduce complexity in measuring agricultural inventories. The Board will consider the need for additional disclosures when agricultural inventories are not measured at full cost in December 2017.

Conditions for net realizable value

The Board decided to expose for comment that agricultural inventories may be measured at net realizable value when all of the following conditions are met:

• the product has a reliable, readily determinable, and realizable market price;
• the product has relatively insignificant and predictable costs of disposal; and
• the product is available for immediate delivery.

Transitional guidance

The Board decided that:

• the new standard on Agriculture should be applied retrospectively, with transition relief for agricultural producers to choose:
  
  • on an asset-by-asset basis to measure biological assets at net realizable value as deemed cost at the opening balance sheet date; and
  • to not change the accounting for assets that are derecognized before the effective date;
• agricultural producers should provide disclosures about the use of net realizable value as deemed cost in its first financial statements prepared under the new standard; and
• the transition relief to use net realizable value as deemed cost of biological assets should be made available to agricultural producers when adopting the accounting standards for private enterprises for the first-time.

Next steps

Board members reviewed and provided feedback on a preliminary draft of the new standard, and will consider a revised draft in December 2017. The Board will issue an exposure draft of the new standard no later than September 30, 2018.

Review the Executive Summary on the AcSB's Web site.