Chapter 6: Disclosure

IAS 41 includes a broad range of disclosures relating to biological assets. Qualitative disclosures include a description of each group of its biological assets, the nature of the entity’s activities involving each group of biological assets and entity’s financial risk management strategies related to agricultural activity.

Quantitative disclosures include non-financial measures or estimates of physical quantities of biological assets and a reconciliation of changes in the carrying amounts of biological assets, either in total or per group of biological assets if this gives more relevant information. This reconciliation should show, amongst other things, fair value gains or losses, purchases, sales and decreases due to harvest.

The carrying value of each group of biological assets does not need to be disclosed separately, but such disclosure is encouraged.

An entity is encouraged to disclose, by group or otherwise, the amount of the change in fair value less costs to sell included in profit or loss due to physical changes and the amount due to price changes. However, the standard acknowledges that this information is generally less useful where the production cycle is less than one year.

The standard requires specific disclosures where biological assets are measured at cost less any accumulated depreciation and impairment losses. The disclosures include, amongst other things, a description of the biological assets, an explanation of why fair value cannot be measure reliably, the depreciation method and useful lives used, and the gross carrying amount and accumulated depreciation at the beginning and end of the period.

If the fair value of biological assets previously measured using the cost model becomes reliably measurable during the period, there should be disclosure of a description of the biological assets, an explanation of why fair value has become reliably measurable, and the effect of the change.

Other disclosures include biological assets whose title is restricted or pledged as security, the amount of commitments for development or acquisitions, and details about government grants related to agricultural activity.

Description of biological assets and activities

The entity is required to provide a description of each group of biological assets (defined as an aggregation of similar living animals or plants), which may take the form of a narrative or quantified description. Entities are encouraged to provide a quantified description of each group, distinguishing between consumable biological assets (i.e., those to be harvested, such as crops) and bearer biological assets (e.g., orchards), or between mature and immature biological assets, as appropriate. The basis for any such analysis should be disclosed.

If not disclosed elsewhere in information published with the financial statements, the following should also be described:

• the nature of the entity’s activities involving each group of biological assets; and
• non-financial measures or estimates of the physical quantities of:
  • each group of the entity’s biological assets at the end of the period; and
  • the output of agricultural produce during the period.

Gains and losses recognised during the period

The entity is required to disclose the aggregate gain or loss arising during the current period on the initial recognition of biological assets and agricultural produce, and from the change in fair value less costs to sell of biological assets.

Note that there is no requirement to disclose separately the gain or loss related to biological assets and the gain or loss related to agricultural produce.

Occasionally, events may cause material gains or losses that should be disclosed separately in accordance with IAS 1. In the context of agricultural activity, such events may include, For example, disease, flood, drought, frost or plague.

Reporting of gains and losses

When a biological asset is first recognised at fair value less costs to sell, any gain or loss arising is reported in profit or loss for the period. A loss can arise on initial recognition of a biological asset due to the requirement to deduct costs to sell. A gain can arise, for example, when a biological asset is first recognised following the birth of a calf.

Gains and losses will also arise over the life of the biological asset to reflect changes in fair value less costs to sell. These gains and losses are also reported in profit or loss in the period in which they arise. Thus, for example, changes in fair value as a calf grows are also recognised in profit or loss.

The gain or loss arising on initial recognition of agricultural produce at fair value less costs to sell is included in profit or loss for the period in which it arises. Agricultural produce is first recognised at the time of harvest (up to that point the asset has been classified as a biological asset). As a result of harvesting, a gain or loss may arise, and that is recognised in profit or loss.

Reconciliation of changes in biological assets

A detailed reconciliation is required of changes in the carrying amount of biological assets between the beginning and the end of the accounting period, which includes:

• the gain or loss arising from changes in fair values less costs to sell;
• increases arising from purchases;
• decreases attributable to sales and biological assets classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with IFRS 5;
• decreases due to harvest;
• increases arising from business combinations;
• net exchange differences arising from the translation of financial statements into a different presentation currency, and on the translation of a foreign operation into the presentation currency of the reporting entity; and
• any other changes.

Restricted assets, commitments and risk management strategies

The entity should disclose:

• the existence and carrying amounts of biological assets whose title is restricted, and the carrying amounts of biological assets pledged as security for liabilities;
• the amount of commitments for the development or acquisition of biological assets; and
• financial risk management strategies in relation to its agricultural activities.

Additional disclosures when fair value cannot be measured reliably

If biological assets within the scope of IAS 41 are measured at cost less accumulated depreciation and impairment losses, the following disclosures are required:

• a description of the biological assets;
• an explanation as to why fair value cannot be determined reliably;
• the range of estimates within which fair value is highly likely to lie, if possible;
• the depreciation method used;
• the useful lives or depreciation rates used; and
• the gross carrying amount and the accumulated depreciation and impairment losses at the beginning and end of the period.

Any gain or loss arising on the disposal of biological assets held at cost less accumulated depreciation and accumulated impairment losses should be disclosed. In addition, the amounts for biological assets held on a cost basis should be disclosed separately in the detailed reconciliation for biological assets set out, and the reconciliation should disclose impairment losses, reversals of impairment losses and depreciation expense recognised in profit or loss during the period.

When an entity moves from a cost basis to a fair value basis during the year, it is required to provide a description of the affected biological assets, an explanation as to why the fair value can now be measured reliably, and the effect of the change.

Government grants

The following disclosures are required for government grants relating to agricultural activity: the nature and extent of government grants recognised;

• unfulfilled conditions and other contingencies attaching to grants; and
• significant decreases expected in the level of government grants.

Additional recommended disclosures

IAS 41 encourages but does not require, separate disclosure of the effects of physical change and price change resulting in changes to the carrying amount of biological assets, particularly when there is a production cycle of more than one year. Growth, degeneration, production, procreation and harvest are each types of physical change that are observable and measurable. Example 2 of the illustrative examples accompanying IAS 41 illustrates how to separate physical change and price change.