AGRICULTURAL ACCOUNTI

GOVERNING STANDARDS

AGRICULTURE
Philippine Public Sector Accounting
Standards (PPSAS) - 27
International Public Sector Accounting
Standards (IPSAS) 27

International Accounting Standards

(IAS)- 41
Philippine Accounting Standards (PAS) -

PPSAS 27 - AGRICULTURE

OBJECTIVE:

To prescribe the accounting treatment

and disclosures for agricultural activity.

SCOPE

Accrual Basis method of accounting to be used

A. This standard applies to the following:

Biological Assets
Agricultural produce at the point of harvest
Government grants covered
B. This standard does not apply to:
Land related to agricultural activity (PPSA 16
& 17)
Intangible assets related to agricultural
activity (PPSAS 31)
Biological assets held for the provision of or

CONTINUATION OF SCOPE

Biological assets should not be accounted under

this standard when they are used for:
a. research
b. education
c. transportation
d. entertainment
e. recreation
f. customs control
g. other activities that are not agricultural
activities

CONTINUATION OF
SCOPE
This standard covers AGRICULTURE PRODUCE:
which is the harvested product of the entitys
biological assets ONLY at the point of harvest
which DOES NOT deal with processing of
agricultural produce AFTER harvest
This standard applies to all public sector entities other
than Government Business Enterprises (GBEs)

Table 1: Agricultural Production

DEFINITION OF TERMS

Agricultural activity is the management by

an entity of the biological transformation and
harvest of biological assets for:
a. sale
b. distribution at no charge or for nominal
charge
c. Conversion into agricultural produce or into
additional biological assets for sale or for
distribution at no charge or for nominal charge
Agricultural produce is the harvested product
of the entitys biological assets.
Biological asset is a living animal or plant.

DEFINITION OF TERMS

Biological transformation comprises the

processes of growth, degeneration, production
and procreation that cause qualitative or
quantitative changes in a biological asset.
Costs to sell are incremental costs directly
attributable to the disposal of an asset, excluding
finance costs and income taxes.
A group of biological asset is an aggregation
of similar living animals or plants.
Harvest is the detachment of produce from a
biological asset or the cessation of a biological
assets life processes.

AGRICULTURAL ACTIVITIES

Examples are:
a. raising livestock
b. forestry
c. cropping
d. cultivating orchards and
plantations
e. floriculture
f. aquaculture (fish farming)

AGRICULTURAL ACTIVITIES

COMMON FEATURES:
A. Capability to change
B. Management of change
C. Measurement of change
OUTCOMES OF BIOLOGICAL
TRANSFORMATION:
A. Asset Changes through growth, degeneration
or procreation
B. Production of agricultural produce

RECOGNITION

An entity shall RECOGNIZE a

biological asset or agricultural
produce when, and only when:
the entity controls the asset as a result
of past events;
it is probable that future economic
benefits associated with the asset will
flow to the entity; and
the fair value or cost of the asset can
be measured reliably.

MEASUREMENT
BIOLOGICAL ASSET

Initial
Fair value less estimated point-ofsale costs; except when fair value
cannot be estimated reliably
(paragraph 30 of IAS 41)
If no reliable measurement of fair
value, biological assets are stated at
cost

MEASUREMENT
BIOLOGICAL ASSET

Subsequent
Fair value less estimated point-of- sale
costs; except when fair value cannot be
estimated reliably (paragraph 30 of IAS
41)
If no reliable measurement of fair value,
biological assets are stated at cost less
accumulated depreciation and
accumulated impairment losses

MEASUREMENT
AGRICULTURAL PRODUCE

Produce harvested from biological

assets is measured at fair value less
cost to sell at the point of harvest
Such measurement is the cost at
the date when applying IAS 2
Inventory or another applicable IFRS

MEASUREMENT

INABILITY TO MEASURE FAIR VALUE

Once the fair value of the biological assets

becomes reliably measurable, the fair
value must be used to measure the
biological asset
Once a noncurrent biological asset meets
the criteria to be defined as held for sale
(or as part of a disposal group classified as
held for sale) then it is presumed fair value
can be measured reliably.

GAINS AND LOSSES

A gain or loss arising on initial recognition

of a biological asset at fair value less costs
to sell and from a change in fair value less
costs to sell of a biological asset shall be
included in profit or loss for the period in
which it arises.
A gain or loss arising on initial recognition of
agricultural produce at fair value less costs
to sell shall be included in profit or loss for
the period in which it arises.

GOVERNMENT GRANTS

An unconditional government grant shall be

recognized in profit or loss when and only when
the government grant becomes receivable.
A conditional government grant shall be
recognized in profit or loss when and only when
the conditions attaching to the government grant
are met.
Government grants related to biological asset
measured at its cost less any accumulated
depreciation and any accumulated impairment
losses shall be governed by IAS 20.

JOURNAL ENTRIES

Example: Beef Cattle Farm No

Slaughtering Activity
Facts:

Company created as at Dec. 31, 2008 with

100 immature calves & 50 mature stock.
Cattles become mature after 1 year.
All movements and transactions took place
at Dec. 31 of each year.
Transportation costs are given per unit.

JOURNAL ENTRIES

Fair Value of both mature & immature

cattle, and cost-to-sell are as follows:

JOURNAL ENTRIES

Movements & Fair Value of Cattle:

JOURNAL ENTRIES

2008: Acquisition

2009: New Born Calves

JOURNAL ENTRIES

2009: New Calves Acquired

2009: Calves Sold

JOURNAL ENTRIES

2009: Re-measurement of biological

assets:

PRESENTATION

Initial gain or loss on biological

assets.
Changes in fair value less costs
to sell of biological assets.
Initial
gain
or
loss
on
agricultural produce

PRESENTATION

Statement of Comprehensive
Income

PRESENTATION

PRESENTATION

PRESENTATION

DISCLOSURE

Disclosure requirements in PAS

41
include:
Carrying
amount of biological assets

Description of an enterprises biological

assets, by broad group
Fair value of agricultural produce harvested
during the period
Description of the nature of an enterprises
activities with each group of biological assets
and non-financial measures or estimates of
physical quantities of output during the period
and assets on hand at the end of the period

DISCLOSURE

Changes in fair value during the period

Information about biological assets whose
title is restricted or that are pledged as
security
Commitments for development or acquisition
of biological assets
Financial risk management strategies
Methods and assumptions for determining fair
value
Reconciliation of changes in carrying amount
of biological assets, showing separately
changes in values, purchases, sales,

DISCLOSURE

If fair value cannot be measured

reliably, additional required
disclosures
Description ofinclude:
the assets

An explanation of the circumstances

If possible, a range within which fair value is
most likely to fall
Gain or loss recognized on disposal
Depreciation method
Useful lives or depreciation rates
Gross carrying amount and the accumulated
depreciation, beginning and ending

DISCLOSURE

Disclosures relating to government

grants include:
Nature and extent of grants
Unfulfilled conditions
Significant decreases in the expected
level of grants