IASB brings bearer plants into the scope of IAS 16

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30 Jun, 2014

The International Accounting Standards Board (IASB) has published 'Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)'. The amendments bring bearer plants, which are used solely to grow produce, into the scope of IAS 16 so that they are accounted for in the same way as property, plant and equipment. The amendments are effective for annual periods beginning on or after 1 January 2016, with earlier application being permitted.



The IASB received feedback from stakeholders expressing concerns about the relevance and usefulness of information provided to users for certain biological assets accounted for at fair value. Especially mature bearer biological assets, which no longer undergo significant biological transformation and are used solely to grow produce, were perceived to be more akin to property, plant and equipment and their operation similar to that of manufacturing. Therefore, the IASB published Exposure ED/2013/8 Agriculture: Bearer Plants proposing to bring biological assets that meet the definition of a 'bearer plant' within the scope of IAS 16 Property, Plant and Equipment rather than using the fair value measurement approach prescribed by IAS 41 Agriculture. The amendments published today update and finalise proposals in the ED.



For the purpose of bringing bearer plants from the scope of IAS 41 into the scope of IAS 16 and therefore enabling entities to measure them at cost subsequent to initial recognition or at revaluation, a definition of a 'bearer plant' is introduced into both standards. A bearer plant is defined as "a living plant that:

  1. is used in the production or supply of agricultural produce;
  2. is expected to bear produce for more than one period; and
  3. has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales."

The scope sections of both standards are then amended to clarify that biological assets except for bearer plants are accounted for under IAS 41 while bearer plants are accounted for under IAS 16.

The amendments also clarify that produce growing on bearer plants continues to be accounted for under IAS 41 and that government grants related to bearer plants no longer fall into the scope of IAS 41 but need to be accounted for under IAS 20 Accounting for Government Grants and Disclosure of Government Assistance.


Other considerations

The IASB explains in the Basis for Conclusion that it decided on a 'no-alternative-use model' for bearer plants instead of a 'predominant-use model' (thereby excluding from the amendments biological assets that have both bearer and consumable attributes) as a predominant-use model would be more difficult to apply because it would require judgement to be applied and as reclassifications between IAS 16 and IAS 41 might become necessary if the predominant use changes.

The IASB also excluded livestock from the scope of the amendments as a cost model would be more complex for livestock. Also, the IASB argued that an active market would usually exist for livestock, resulting in fair value information being readily available and easier to apply than cost measurement.


Dissenting opinions

Two IASB members dissented from the publication of the amendments because they believe that the amendments will eliminate information about the fair value changes in bearer plants and the underlying assumptions used to estimate those changes. They believe that the amendments are no improvement to IFRSs and lower the quality of the information available in the financial statements of entities engaged in agricultural activities. Therefore, they conclude that the amendments fail to meet the Board's own criteria for new or amended standards.


Effective date and transition

The amendments are effective for annual periods beginning on or after 1 January 2016. Earlier application is permitted.

On the initial application of the amendments, entities are permitted to use the fair value of items of bearer plant as their deemed cost as at the beginning of the earliest period presented. Also, an entity need not disclose the quantitative information required by paragraph 28(f) of IAS 8 for the current period. However, entities are required to provide these disclosures for each prior period presented.


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