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IAS 41 — Bearer plants

Background

This is a limited scope project to consider an amendment to IAS 41 Agriculture in relation to bearer biological assets (BBAs, e.g. fruit trees, grape vines), as to whether these assets would be better accounted for under IAS 16 Property, Plant and Equipment rather than using the fair value measurement approach prescribed by IAS 41.

There is support (especially those in the plantation industry) for a limited-scope project for BBAs and such a project is also supported in the Issues Paper produced by the Asian-Oceanian Standard Setters Group (AOSSG) and the IASB's Emerging Economies Group (EEG). Users of financial statements that responded to the IASB's agenda consultation considered a project on bearer biological assets to be important/urgent.

The AOSSG noted that concerns had been raised by investors (as well as preparers) about the relevance and usefulness of information provided to users for certain biological assets accounted for at fair value.  Specifically the paper included a survey performed by the Malaysian Accounting Standards Board (MASB) in 2010 that found that a group of analysts specialising in plantation did not find fair value information for BBAs useful, particularly the presentation of changes in fair value within the profit or loss – which in some instances can be large and distort profits.

The key issues to be addressed by the IASB as part of this limited-scope project are as follows:

  1. What definition of bearer biological assets should be used in the scope of the amendment, e.g. asset has no alternative use, the predominant use of asset (i.e. the treatment of a biological asset would depend on what it is predominantly used for), or plants only (i.e. excluding livestock)?
  2. Should guidance for BBAs be incorporated into IAS 16 or remain in IAS 41?
  3. What should be the measurement attribute of BBAs before being placed into production (e.g. fair value or cost accumulation)?
  4. Is there a need for additional measurement guidance in IAS 16 for BBAs, such as:
    1. determining the unit of account
    2. accounting for CBAs growing on the BBAs
    3. unique costs of growing BBA (capitalise versus expense)
    4. additional disclosures
    5. transitional provisions?

The IASB added this project to its agenda in September 2012.  The IASB decided a Discussion Paper is not required due to the existing research that had already been undertaken in the topic area.

 

Current status of the project

This project has been completed.  The IASB issued Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) on 30 June 2014.

 

Project milestones

DateDevelopmentComments
September 2012 Limited scope project added to the IASB agenda
26 June 2013 ED/2013/8 Agriculture: Bearer Plants published Comment deadline 28 October 2013
30 June 2014 Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) issued Effective for annual periods beginning on or after 1 January 2016

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