MATERIALS AND METHODS
IAS 41 deals with the management of biological assets transformation, considering logging, orcharding, plantations, horticulture and aquaculture. This standard will apply for the accounting of the following elements, as they refer only to agricultural activities:
a) Biological assets – plants or living animals. The transformation process creates the processes of growing, anatomic degradation of living cells, production or breeding, which cause quality or quantity alteration of the biological assets. A biological assets or an agricultural produce are accounted only if the economic entity controls the asset due to previous events, and the future economic benefits generated by the asset are obtained by the entity, where the fair value or cost can be realistically estimated. A biological asset is evaluated on the initial accounting and on the year-end accounts, at its fair value, minus sale costs.
b) The agricultural produce at the harvesting point is actually the harvested and the biological asset of the company. The harvest is the detachment of produce from the biological asset, or ceasing the vital processes of a biological asset. The harvested agricultural produce must be evaluated and accounted on basis of the results, at its fair values, minus sale costs during harvest. According to LAS 2 – Inventories, this estimation leads to the input cost for the harvest estimation. In this care, the fair value is estimated in the following order:
- Current price existent on an active market
- Most recent transaction price
- Current market price for similar asset or products, considering possible dissimilarities
- Sector references
There are situations where there is on reference price or value for a biological asset; in this circumstance the fair value will be calculated as updated value of asset’ net expected cash flows. This standard implies that there is always a realistic way of determining fair value; if not, one will consider applying the amortized cost as replacement for the fair value.
C) The governmental grants will be accounted as revenues, when the receivables are received. Although LAS/IFRS includes in IAS 20
“Accounting for Government Grants and Disclosure of Government Assistance “ special stipulations related to government grants, IASB was forced to create separated stipulations for their accounting due to the fact that agricultural government grants are becoming more and more frequents. Offering unconditional grants is not corrected by any restrictive stipulation; they are conditioned when their offering depends on at least 3 requirements: for example, the government stipulates the land to be exploited for 3 years; if this condition is not fulfilled, the grant must be reimbursed. The unconditional government grants are recognized as revenue only when the grant becomes receivable. The conditional grants, such as those given for ceasing as agricultural activity will be registered as revenues when the conditions corrected with the grants are fulfilled, and chargeable revenue is registered for the grant donor. The IAS 41 refers only to the grants that are given for biological assets evaluated at fair value, minus estimated costs at the sale point. The biological assets grants, as they are registered with historical analyzed costs, are treated according with IAS 20.