IND AS 41 : AGRICULTURE

Accounting treatment for Biological assets are given in the Ind As -41. Previously There are no standards are given for the agricultural sectors in India therefore Ind As 41 is derived for proper treatment of the biological Assets and transactions related to the sectors.

First lets understand, what is biological Assets?

·     Living Plant & living Animals are called as biological Assets.

Types of biological Assets:

Bearer Plants: Bearer produces for more than one year. For eg. All fruits Bearing Plants.

It is derived in Ind As 16- PPE as self-constructed Assets

Consumable Plants: Directly usable in ply or lumber (Furniture and Fittings).

Consumable Plant and consumable Animals are derived in this standard which Ind As 41.

Agriculture: Management of biological transformation of biological assets.

Transformation in the form of Quality and Quantity.

Quality: Change in Nutrients level

Quantity: Change in Weight and Structure.

Agricultural Activity:

Agricultural activity is management of biological Assets and harvest of biological assets and agricultural produced.

Recognition of biological Assets:

1.     Future Benefit is probable.

2.     Biological Assets is controllable

3.     Fair value can be measured reliably.

Accounting Treatment:

Purchase:

Biological Asset Dr.

P&L  A/c (purchase exp) Dr.

     To cash A/c

     To P&L A/c (balancing figure)

Self-Generated:

Biological Asset Dr.

To Fair Value Gain (P&L)

Note: Biological Asset is recorded at fair value less cost to sale.

Operating Expenses:

Expenses (P&L) Dr.

To Cash A/c

Government Grant related to agricultural activity:

Govt. Grants are of two types: 

1.     Conditional:

Receipt of conditional Grants:

Bank A/c Dr.

To Deferred govt. Grant (liability)

When condition for the grant are met:

Deferred govt. grants Dr.

To P&L A/c

2.     Unconditional:

Recognized as Income upon Receipt:

Bank A/c Dr.

To Govt. Grant A/c (P&L)

Sale of Biological Assets:

Cash A/c Dr.

To Sales Revenue

Conversion into Inventory:

Inventory Dr.[Fair value less cost to sale]

P&L (B.F.) Dr.

To Biological Asset

To Cash A/c

To P&L (B.F.)

Valuation at reporting date

Increase:

Biological Assets Dr.

To Fair Value gain (P&L)

Decrease:

Fair Value loss (P&L) Dr.

To Biological Assets