A bearer plant is defined as “a living plant that:

1. is used in the production or supply of agricultural produce;
2. is expected to bear produce for more than one period; and
3. has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.”

The following are not bearer plants:

• Plants grown to be harvested and sold as produce, such as lumber.
• Annual crops which do not bear produce for more than one period, such as maize and wheat.
• Plants cultivated to produce agricultural produce, where the bearer plant will also be harvested and sold as agricultural produce (For example, trees that are cultivated both for their fruit and their lumber). If the sales from the wood are incidental scrap sales, the tree still meets the definition of a bearer plant.

Bearer plants that no longer bear produce are commonly cut down and sold as scrap at the end of their life. Such incidental scrap sales would not prevent the plant from being a bearer plant.

Bearer plant scope An entity farms walnut trees for the harvest of walnuts and, ultimately, for the valuable timber obtained at the end of the trees’ productive lives. Should the trees be accounted for under IAS 16 or IAS 41? The last criterion in the definition of bearer plant is that the likelihood that the plant will be sold as agricultural produce must be remote, except for incidental scrap sales. If part of the objective of growing the trees is to harvest valuable lumber at the end of the trees’ productive lives, it seems unlikely that this criterion will be met. The walnut tree would be in the scope of IAS 41. Can the amendment be applied, by analogy, to livestock reared solely as breeding animals? No, all biological assets that are animals remain within the scope of IAS 41. Is there a choice to continue to account for bearer plants under IAS 41, rather than under IAS 16? No. If the plant meets the definition of a bearer plant, it must be accounted for in accordance with the requirements of IAS 16.

Biological assets that meet the definition of ‘bearer plants’ are measured either at cost or revalued amounts, less accumulated depreciation and impairment losses under IAS 16.

Bearer plant measurement What depreciation method should be applied to bearer plants? The depreciation method chosen should reflect the pattern in which the future economic benefits of the plants are expected to be consumed by the entity. IAS 16 does not specify a particular method that must be used, so judgement will need to be applied. Are bearer plants subject to impairment? Bearer plants accounted for under IAS 16 will fall in the scope of IAS 36 for impairment testing. This applies irrespective of whether the cost or revaluation model is used. Can borrowing costs be capitalised as part of cost? Yes. Borrowing costs are capitalised until substantially all of the activities necessary to prepare the bearer biological asset for its intended use are complete. This is likely to be when the bearer plant reaches maturity and depreciation commences. Can notional land rent be capitalised as part of the cost of bearer plants? No. The notional land rent is not a cost under IAS 16 and therefore cannot be included in the cost of bearer plants. If the land is actually leased from a third party, the right-of-use asset depreciation can be capitalised as part of the cost of the bearer plant. Interest on the lease liability may also be eligible for capitalisation, refer to borrowing costs above. Can bearer plants be measured under the revaluation method? Yes. The choice of using the revaluation method in IAS 16 is available. It has to be used for all assets within the same class. Bearer plants could be such a class.

Immature bearer plants are similar to an item of property, plant and equipment being constructed before its intended use and are measured at accumulated cost until the bearer plants are in the location and condition necessary for them to be capable of operating in the manner intended by management (that is, when bearer plants reach maturity).

Discussion on determining when bearer plants reach maturity There is no specific guidance on when a bearer plant reaches maturity. For example, a palm oil tree might start to grow produce after two years, but only reach its maximum yield after seven years. A grape vine might take many years to produce the right quantity and quality of fruit. Entities will need to determine their own reasonable accounting policy for determining when bearer plants reach maturity.

Requirements applicable to government grants relating to agricultural activity

IAS 41 sets out specific rules for accounting for government grants related to agricultural activity, which are discussed. The treatment prescribed may give a different result than would arise if IAS 20 were applied. IAS 20 should only be applied in relation to the following biological assets:

• bearer plants; and
• other biological assets carried on a cost basis (i.e., the measurement reliability exception is applied), as described.

Grants relating to biological assets measured on a fair value basis

IAS 41 requires that unconditional grants related to biological assets measured at fair value less costs to sell should be recognised in profit or loss when, and only when, the grant becomes receivable.

If the grant is conditional, it should be recognised in profit or loss when, and only when, the conditions attached to the grant are met. This includes grants under the conditions of which entities are required not to engage in specified agricultural activity.

Government grants related to agricultural activity will frequently be subject to conditions such as the requirement to continue to engage in a specified activity (or to refrain from engaging in a specified activity) for an extended period of time. If the condition is breached, then all of the grant may be refundable. In such circumstances, no part of the grant is recognised in profit or loss until the specified period has elapsed. However, when the terms of the government grant allow part of the funds to be retained according to the time that has elapsed, then the entity should recognise that part of the grant in profit or loss as time passes.

Grants relating to biological assets measured on a cost basis

Government grants relating to biological assets accounted for on a historical cost basis (i.e., bearer plants and other biological assets carried on a cost basis) are dealt with under IAS 20.