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Agricultural Accounting

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by

Michael Marthe

on 26 March 2013

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Transcript of Agricultural Accounting

Living animals and plants are always reported at:
Lower of cost or market or depreciated cost
Depending on the type of asset and its use
Agricultural produce may be reported at sales price less costs of disposal only if all of the following conditions are met:
The product has a reliable, readily determinable, and realizable market price
The product has relatively insignificant and predictable costs of disposal
The product is available for immediate delivery Cost Model Biological Asset measured at each reporting date
Fair value less cost to sell
Agricultural Produce measured when harvested
Fair value less cost to sell at the point of harvest Fair Value Method When to recognize? Accounting for Agriculture Cody Ramirez, Michael Marthe, Judy Vuong, Crystal Martinez IAS 41 & ASC 905 IFRS When an entity controls the asset
Future economic benefits
Reliable measurement GAAP Measurement Agricultural Activity Biological Transformation Biological asset Agricultural Produce Determining Fair Value Active Market Determines the Fair Value
If market does not exist:
Uses the most recent transaction price
similar market prices
sector benchmarks
Entities typically use the most reliable estimate of Fair Value Measurement Biological Asset measured at:
Cost less Accumulated Depreciation/ Impairment Losses
Agricultural Produce measured at:
Cost at the date of harvest
Apply Section 13 Examples of agricultural activity include:
Raising livestock, fish or poultry
Stud farms (for example, breeding horses or cattle)
Forestry
Cultivating vineyards, orchards or plantations
Floriculture Recognition is not limited is a natural change in a biological asset. It includes growth of living animals or plants, reduction in output due to age or disease and the production of new biological assets through a managed reproductive program. Living animals and plants are not reported at their fair value
Lower of cost or market or depreciated cost
Depending on the type of asset and its use
Agricultural produce may be reported at sales price less costs of disposal, only if all of the following conditions are met:
Product has a reliable, readily determinable, and realizable market price
Product has relatively insignificant and predictable costs of disposal
Product is available for immediate delivery
Otherwise, agricultural produce is valued at the lower of cost or market Examples include... Sheep, pigs, beef cattle, poultry and fish.
Dairy cows.
Trees in a forest.
Plants for harvest (for example, wheat and vegetables).
Trees, plants and bushes from which agricultural produce is harvested (for example, fruit trees, vines and tea bushes). Produce and Harvest (for example, milk, tea leaves and lumber) from these assets become agricultural produce, and are then treated as inventory. U.S. GAAP does not address directly situations in which there are different active markets for agricultural produce
If there is no active market, then agricultural produce is not measured at sales price less costs of disposal
There is no applicable method to estimate or measure fair value the management by an entity of the biological transformation of
biological assets for sale, into agricultural produce or into additional biological assets. comprises the processes of growth, degeneration,
production and procreation that cause qualitative or quantitative changes in a biological asset. a living animal or plant. the harvested product of the entity’s biological assets. And just like anything else, these activities must be accounted for... There are many entities that take part in agricultural activities... ASC 905 - Agriculture
IAS 41 - Agriculture
FGAP - Farm GAAP Natural breeding of velociraptors doesn't count as an agricultural activity... Example... Company Created 31 December 2008

1. 100 Immature Calves and 50 Mature Cows were acquired
2. Cattle Mature (Reach weaning age) in 1 year
3. All movements and transactions happen at 31 December of each year.

2009-

Newborns
Acquired-105 New Born-10 Transfer to Mature-100

Mature
Acquired-0 Transfer from Immature-100 Sold-50 Financial Statements Farmer Style
Full transcript