International Financial Reporting Standards_guide.pdf

132 Chapter 12 Agriculture (IAS 41)
12.3 KEY CONCEPTS
12.3.1 Agricultural activity is the management by an entity of the biological transformation
and harvest of biological assets for sale, or for conversion into agricultural produce or into
additional biological assets. The key criterion for determining whether an activity represents
agricultural activity is the active management of biological transformation. For example, fish
farming would be considered agricultural activity, as the biological transformation is actively
managed. Harvesting from unmanaged sources, such as fishing in the ocean, is not agricultural
activity.
12.3.2 Agricultural produce is the harvested product of the entity’s biological assets.
12.3.3 A biological asset is a living animal or plant.
12.3.4 Harvest is the detachment of produce from a biological asset or the cessation of a
biological asset’s life processes.
These concepts can be explained by the following table, reproduced from IAS 41:
Biological assets
Agricultural produce
Products that are the result of
processing after harvesting
Sheep Wool Yarn, carpet
Trees in a plantation forest Felled trees Log, lumber
Plants
Cotton
Harvested cane
Thread, clothing
Sugar
Dairy cattle Milk Cheese
Pigs Carcass Sausages, cured hams
Bushes Leaf Tea, cured tobacco
Vines Grapes Wine
Fruit trees Picked fruit Processed fruit
12.3.5 Fair value is the amount for which an asset could be exchanged between knowledgeable,
willing parties in an arm’s length transaction.
12.3.6 An active market is a market where all the following conditions exist:
■ The items traded within the market are homogeneous.
■ Willing buyers and sellers can normally be found at any time.
■ Prices are available to the public.