Any accountant with interest in farming may like to read up how the fair value model is applied to agriculture, as per IAS 41. This standard – as T. P. Ghosh writes in ‘ Indian Accounting Standards (Ind AS) and IFRSs for Non-finance Executives ’ ( >www.taxmann.com ) – is applied to account for biological assets, agricultural produce at the point of harvest, and government grants relating to biological assets.
For starters, ‘agricultural activity’ is ‘a specialised activity defined as an entity’s management of the biological transformation of biological assets for sale into agricultural produce or into additional biological assets.’ It covers diverse range of activities such as livestock farming, forestry, annual or perennial cropping, cultivating orchards, plantations, floriculture and aquaculture, the book informs.
“Any unmanaged activity like ocean fishing does not fall under this standard. Similarly, managing recreational activities such as zoos and game parks is not agricultural activity.”
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While ‘biological assets’ are ‘living animals or plants such as sheep, trees, and vines,’ the phrase ‘biological transformation’ is defined as the process of growth, degeneration, production, and procreation causing ‘qualitative and quantitative changes.’ Examples of the ‘qualitative’ nature are changes to density, ripeness, fat or protein content, and fibre strength; and the ‘quantitative’ changes relate to weight, length, and so on.
Recommended guidance to bean-counters in the field.
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