IAS 41 contains guidance on recognising, in profit and loss, grants receivable in respect of biological assets measured at fair value less costs to sell. These grants are outside IAS 20’s scope.

An unconditional grant is recognised as income when it becomes receivable. A conditional grant, on the other hand, should be recognised as income only when the conditions are satisfied.

Government grant subject to annual planting Entity A is in the business of growing and selling rice. The costs of rice plantation activities are high and the government has offered grants to growers as an incentive to remain in the industry and maintain the food supply. These grants will be awarded when the entity plants its crop, provided that the entity continues in the business. The purpose of the grant is to reduce the entity’s operating costs during each year. The grants are available for a three-year period. The grant should be recognised when it is receivable. This is at the point in each of the three years when the rice crop is planted. At that point, the entity has complied with the conditions of the grant.

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Government grant paid up-front Entity B is in the business of growing and selling rice. The costs of rice plantation activities are high and the government has offered grants to growers as an incentive to remain in the industry and maintain the food supply. These grants will be awarded when the entity plants its crop, provided that the entity continues in the business. The purpose of the grant is to reduce the entity’s operating costs during each year. The grants are available for a three-year period. The full grant is paid at the beginning of the three-year period, but is partially repayable if entity B ceases its rice business. The amount repayable depends on how much of the three-year period remains outstanding. The grant should be recognised as income when it becomes unconditional. Hence, at the point in each year when an amount of the grant becomes non-refundable, that amount should be recognised as income. The balance is deferred to future periods.

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Government grant subject to certification For many years, entity C has grown fruit trees using traditional methods. From 20X0, the entity wishes to switch to organic methods. In order to assist with the costs of converting to organic farming, annual grant aid is available for three years, provided certain conditions are met. For example, the land must be registered as ‘in conversion to organic farming’ with an Organic Inspection Body (OIB) throughout the three-year period. A condition of the grant is that the registration must be certified by the OIB every year to signify that the company complies with the organic requirements. The grant should be recognised as income when it becomes unconditional. Hence, at the point in each year when the land is certified by the OIB to be compliant and a portion of the grant becomes non-refundable, the relevant amount will be recognised as income.

Where biological assets are carried at cost less accumulated depreciation and impairment losses, the recognition in profit or loss of any government grants related to those assets is dealt with by IAS 20. Grants that do not relate specifically to biological assets (For example, a grant to build a new milking stable) fall within IAS 20’s scope.

Several jurisdictions have introduced emission trading schemes relating to agricultural activities, particularly forestry. There is no detailed guidance on accounting for emission trading schemes relating to agricultural activities.