Questions and Analysis

Introduction

Anyone who studies International Accounting Standards will be aware of the dearth of materials available to help them. The International Accounting Standards Board (IASB) has published the Standards themselves, of course, and they have also published a book called IAS Explained which, when read along side the Standards is an excellent text.

There is also the excellent www.iasplus.com site that contains a vast amount of information on the Standards including summaries of every Standard and up to date news from the IASB and other sources.

This page takes an overview of IAS 41: Agriculture. It does so with a mixture of questions and comment and direct references to the Standard itself. The solutions to the questions on this page are available to anyone who asks: just email me and I'll send them by return ... don't forget to tell me what you want!! I can't put the answers here because to do so could infringe the IASB's copyright.

I have used one of the few good books on IASs, by Epstein and Mirza, and have taken a couple of their examples to help to explain some of the points arising from the Standard.

The layout of this page is that I have worked my way through the Standard from start to finish exploring the most important paragraphs as I go. It will be most useful if you have the Standard in front of you as you work your way through this page.

Questions

These questions have been designed for anyone who needs to work systematically through IAS 41: Agriculture and who needs to appreciate the contents of the Standard and have a good level of understanding of the concepts within the Standard.

Many of the questions are seek and learn type questions and others are deeper than that. My suggested solutions draw directly on the IAS 40.

1 State the grounds did the IASB decide, in 1994, to work on and then implement an Accounting Standard for Agriculture?

2 IASs 2, 16, 18 and 40 made agricultural activities exempt from their provisions and scope: state the precise exemptions given in these standards as they relate to agricultural activity.

3 To what does IAS 41: Agriculture apply: that is, what is the scope of the Standard?

4 To what does IAS 41: Agriculture not apply, according to paragraph 5 of the Standard?

5 Paragraph 3 of IAS 41: Agriculture says that the Standard is applied to agricultural produce, which is the harvested product of the enterprise's biological assets, only at the point of harvest. Thereafter … Thereafter … state which IAS takes over from IAS 41: Agriculture?

6 In the context of IAS 41: Agriculture distinguish between

Biological assets

Agricultural produce

Products that are the result of processing after harvest

7 Complete the gaps in the following quotations from IAS 41: Agriculture: Recognition and Measurement

A biological asset should be measured on initial recognition and at each balance sheet date at __________ less __________ costs, except for the case described in paragraph 30 where the __________ cannot be measured reliably.
(IAS 41: Agriculture paragraph 12)

Agricultural produce harvested from an enterprise's biological assets should be measured at __________ less __________ costs at the point of __________. Such measurement is the cost at that date when applying __________, or another applicable International Accounting Standard.
(IAS 41: Agriculture paragraph 13)

8 Define fair value as given in IAS 41: Agriculture

9 Discuss the implications of the existence of an active market for the fair value of a biological asset or agricultural produce?

10 What does IAS 41: Agriculture say we must do when arriving at fair values when an active market does not exist?

11 Define point of sale cost as given in IAS 41: Agriculture.

12 Paragraph 14 of IAS 41: Agriculture clearly states what point of sale costs must exclude: state those exceptions.

13 State the conditions under which IAS 41: Agriculture say that cost may approximate fair value?

14 If biological assets are attached to the land on which they are growing, and this is usually the case, and when there may be no separate market for biological assets that are attached to the land but there is an active market for the combined assets, how can we value those biological assets?

15 Set out the income statement and statement of changes in equity of an agricultural organization, in accordance with IAS 41.

16 Set out the balance sheet of an agricultural organization, in accordance with IAS 41.

17 Set out the cash flow statement of an agricultural organization, in accordance with IAS 41.

Questions devised and prepared by

© Duncan Williamson
4 August 2002