IAS 2 Inventory Measurement
This free, guided checker walks your finance team through the key decision points for IAS 2 Inventory Measurement. Answer a few questions to see the likely treatment and the evidence to document.
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IAS 41 Biological Assets and Agricultural Activity
This free, guided checker walks your finance team through the key decision points for IAS 41 Biological Assets and Agricultural Activity. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
The questions this tool walks you through
Here is what the checker asks and why each step matters. Prefer to talk it through? Contact us and we will help directly.
Does the entity manage living plants or animals for transformation into agricultural produce or for additional biological assets?
Agricultural activity includes cultivation, harvesting, and management of biological transformation; land and bearer plants are outside IAS 41 and accounted for under IAS 16. The distinguishing feature is active management of the conditions for growth, degeneration, production, or procreation (IAS 41.6). Harvesting from unmanaged sources is not agricultural activity even though the assets are living.
IAS 41 does not apply; account for land under IAS 16 or IAS 40, bearer plants under IAS 16, and unmanaged harvesting under other applicable standards (IAS 41.1-2).
Official guidance: IFRS issued standards
Has the entity identified biological assets separately from agricultural produce at the point of harvest?
Biological assets are living animals or plants; agricultural produce is the harvested product of biological assets and is generally measured at fair value less costs to sell at the point of harvest under IAS 41.13. Map each product line to its harvest point, because processing after harvest (for example wine from grapes) is IAS 2 territory. Misclassifying post-harvest processing inside IAS 41 is the common error.
Separate biological assets from harvested produce; IAS 41 applies to produce only up to the point of harvest, after which IAS 2 or another applicable standard takes over (IAS 41.3; IAS 41.13).
Official guidance: IFRS issued standards
Is fair value reliably measurable for the biological assets at each reporting date?
Fair value is presumed measurable unless quoted prices are unavailable and alternative estimates are clearly unreliable; active markets for agricultural commodities often support reliable measurement. IAS 41.30 allows the presumption to be rebutted only on initial recognition, so an asset once measured at fair value cannot revert to cost. Document the market evidence considered before concluding fair value is unreliable.
Use the interactive tool above to see how this applies to your situation.
Official guidance: IFRS issued standards
When fair value is not reliably measurable, is the asset measured at cost less accumulated depreciation and impairment?
The cost model applies only while fair value remains unreliable; remeasure to fair value less costs to sell when reliable measurement becomes available without restating prior periods. While on the cost model, depreciate the assets and test them for impairment under IAS 36. Keep evidence of the periodic reassessment of whether fair value has become reliably measurable.
Measure the asset at cost less accumulated depreciation and impairment under IAS 41.30, or complete a reliable fair value estimate, before finalising recognition.
Official guidance: IFRS issued standards
Has fair value less costs to sell been determined using market-determined prices adjusted only for transport and other costs to sell?
Use quoted prices in active markets where available; otherwise apply IFRS 13 techniques such as adjusted market prices, present value of net cash flows, or sector benchmarks for similar assets. Adjust for transport costs when location is a characteristic of the asset (IFRS 13.26), then deduct incremental costs to sell such as commissions and levies (IAS 41.5). Existing sales contract prices do not override the market-based fair value (IAS 41.16).
Complete the fair value measurement using IFRS 13 valuation techniques before initial and subsequent recognition (IAS 41.8; IFRS 13.24-26).
Official guidance: IFRS issued standards
Have gains or losses from changes in fair value less costs to sell been recognised in profit or loss for the period?
IAS 41.26 requires gains and losses arising on initial recognition of a biological asset and from changes in fair value less costs to sell to be included in profit or loss in the period in which they arise. A loss can arise at initial recognition because costs to sell are deducted, and a gain can arise when a new asset such as a calf is born (IAS 41.27). There is no revaluation reserve option - deferring fair value movements in equity is an IAS 16 concept that is not available under IAS 41.
Recognise all fair value changes in profit or loss for the period in which they arise, as required by IAS 41.26.
Official guidance: IFRS issued standards
At the point of harvest, has agricultural produce been measured at fair value less costs to sell with any gain or loss recognised in profit or loss?
The fair value at harvest becomes deemed cost for subsequent measurement under IAS 2 or another applicable standard unless the produce remains a biological asset. Unlike biological assets, there is no unreliable-fair-value exception for produce at harvest - IAS 41.32 states that fair value can always be measured reliably at that point. Capture harvest quantities and harvest-date market prices contemporaneously rather than estimating them at period end.
Measure produce at harvest-date fair value less costs to sell before transferring to IAS 2; that measurement is the deemed cost of the inventories (IAS 41.13; IAS 2.20).
Official guidance: IFRS issued standards
Has government grant income related to biological assets been accounted for under IAS 20 and IAS 41.34?
Unconditional grants related to biological assets measured at fair value less costs to sell are recognised in profit or loss when receivable; conditional grants are recognised when conditions are met. IAS 20 applies only when the related biological asset is measured at cost under IAS 41.30 or the grant relates to bearer plants (IAS 41.37; IAS 41.2(c)). Deducting a grant from the carrying amount of a fair-value asset is the common misapplication.
Recognise unconditional grants when receivable and conditional grants when the conditions are met (IAS 41.34-35); IAS 20 applies instead only when the related asset is measured under the IAS 41.30 cost model (IAS 41.37).
Official guidance: IFRS issued standards
Are bearer plants such as grape vines or rubber trees accounted for under IAS 16 rather than IAS 41?
Bearer plants are living plants used to produce or deliver agricultural produce and are depreciated under IAS 16; produce growing on bearer plants remains within IAS 41 until harvest. Plants cultivated to be harvested themselves, or sold both for produce and as plants beyond incidental scrap sales, are not bearer plants (IAS 41.5A). Valuing the growing produce separately from the vine or tree is the practical challenge to plan for.
Reclassify bearer plants to IAS 16 property, plant and equipment while keeping the produce growing on them within IAS 41 (IAS 41.2(b); IAS 41.5C).
Official guidance: IFRS issued standards
Has physical quantity and fair value movement information been captured for IAS 41 disclosure requirements?
Disclose the aggregate gain or loss from fair value changes, details of government grants, and quantitative information about biological assets by group where practicable. IAS 41.50 requires a reconciliation of changes in carrying amount separating fair value changes, purchases, sales, harvest, and business combinations, and IAS 41.51 encourages splitting fair value movements between price and physical change. Start collecting herd, flock, or plantation quantity data during the period, not at year end.
Build the carrying-amount reconciliation and quantity disclosures required by IAS 41.50 and IAS 41.46 before the financial statements are issued.
Official guidance: IFRS issued standards
Which measurement basis best matches the biological assets at the reporting date?
Confirm consistency between measurement basis, grant recognition, and note disclosures before finalising the agricultural reporting package. The measurement basis also drives the grant model: IAS 41.34-35 applies to fair-value assets while IAS 20 applies to cost-model assets (IAS 41.37). Check that the same asset group is not carried on different bases without the IAS 41.30 justification.
Maintain fair value less costs to sell at each reporting date with all changes recognised in profit or loss (IAS 41.12; IAS 41.26). Continue the IAS 41.30 cost model, provide the IAS 41.54 disclosures, and reassess each period whether fair value has become reliably measurable.
Official guidance: IFRS issued standards
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