IAS 41 — Subsequent expenditure

Date recorded:


The Committee received a submission about an entity shall capitalise or expense the costs related to the biological transformation of biological assets (subsequent expenditure) applying IAS 41. The submitter also considers given there is lack of guidance in IAS 41, IAS 41 should be amended in order to reduce diversity in practice and enhance comparability of financial information across entities in the same industry.

Staff analysis

The staff analyse that IAS 41 does not prescribe how to account for subsequent expenditure. Biological assets are measured at fair value less costs to sell at the end of each reporting period, except in particular situations in which fair value cannot be measured reliably. Capitalising or expensing subsequent expenditure does not affect the measurement of biological assets nor does it have any effect on profit or loss (if measured at fair value less costs to sell). In the absence of requirements in IAS 41 and guidance set out in paragraph BC4 of IAS 23 Borrowing Costs, the staff think entities can either capitalise or expense subsequent expenditure. The staff also highlight the respective requirements of consistency in application of accounting policy and disclosure set out in IAS 8 and IAS 1.

With regards to the standard-setting agenda, the staff first consider whether there shall be a requirement to either capitalise or expense the subsequent expenditure. IAS 40 is used by analogy but the staff note the difference is that the requirement to capitalise subsequent expenditure for investment properties was agreed by the Board. However, the staff think significant time and effort is required to develop an amendment that requires capitalisation of subsequent expenditure because of the existence of diverse range of biological assets and difficulty in identifying capitalisation criteria.

Staff recommendation

The staff recommended publishing a tentative agenda decision acknowledging that IAS 41 allows either approach but that the Committee does not consider that amending IAS 41 is justified.


A Committee member acknowledged IAS 41 has no specific requirements and so entities need to make an accounting policy choice with reference to IAS 8:10 that focuses on relevance and reliability in selecting the accounting policy. Another Committee member stated that if an entity considers the requirements in IAS 8:11 it can make an accounting policy choice of capitalising the subsequent expenditure – i.e. considering requirements in other similar IFRS Standards.

In practical scenarios, a Committee member pointed out that mandating one policy over the other may not increase the transparency of the financial information for different sectors of industries. Another Committee member observed some biological assets grow by nature (with minimum cost) while some grow by a lot of efforts by the human beings and hence the Board can consider developing models that cater for different types of biological assets.

The Committee decided, by a majority of votes, not to add the matter to the standard-setting and to adopt the tentative agenda decision.

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