Ind AS 41 Agriculture: formula sheet

Key formulas

Unconditional grant

Recognise in profit or loss when the grant becomes receivable

Applies to biological assets at fair value less costs to sell. The trigger is the right to receive, not cash receipt.

Conditional grant

Recognise in profit or loss when the conditions attaching to the grant are met

Includes grants that require the entity not to engage in specified agricultural activity. Before this, show any amount received as a liability.

Scope boundary

Fair value less costs to sell model → Ind AS 41; cost model or bearer plants → Ind AS 20

Bearer plants fall under Ind AS 16, so their grants follow Ind AS 20.

Presentation

Grant income = profit or loss item; not deducted from the asset and not deferred

The asset stays at fair value less costs to sell.

Disclosure

Disclose the grants recognised in the period, unfulfilled conditions and other contingencies, and significant expected decreases in grant levels

Disclosure is a common written-answer point.

Quick revision

• Ind AS 41 applies to biological assets, agricultural produce at the point of harvest, and government grants related to biological assets measured at fair value less costs to sell. It does not apply to produce after harvest (Ind AS 2) or to bearer plants themselves (Ind AS 16). Produce growing on bearer plants remains within Ind AS 41.
• It does not apply to land, or to intangible assets related to agricultural activity (Ind AS 38).
• Bearer plants are accounted for under Ind AS 16, but the produce growing on them is under Ind AS 41.
• Biological assets are measured at fair value less costs to sell at initial recognition and at each reporting date.
• Agricultural produce is measured at fair value less costs to sell only at the point of harvest.
• After harvest, produce is inventory under Ind AS 2, with that harvest-date value as its cost.
• Gains or losses from changes in fair value less costs to sell go to profit or loss in the period they arise.
• Costs to sell are incremental costs of selling, such as commissions and levies. They exclude transport and other costs to get assets to market.
• Fair value follows Ind AS 113. Where you can, use prices from an active market for the asset in its present location and condition.
• An unconditional grant is recognised in profit or loss when it becomes receivable. A conditional grant is recognised only when the conditions are met.
• Disclose a reconciliation of the carrying amount of biological assets between the start and end of the period.
• Land is outside Ind AS 41. Land on which crops grow follows Ind AS 16 or Ind AS 40, as applicable.

Common mistakes

• Recognising the grant only when cash is received. Fix: For an unconditional grant, the trigger is the date it becomes receivable. Recognise a receivable if cash has not come in.
• Spreading the grant over the useful life of the asset. Fix: Ind AS 41 gives no such deferral for fair value assets. Take the whole grant to profit or loss at the trigger date.

Exam tips

• In MCQs, the trigger is the key. 'Receivable' points to unconditional and 'conditions met' points to conditional. Watch the dates and the reporting period.
• In written answers, use provision-facts-conclusion form. State the Ind AS 41 rule, apply the dates and amounts, then give the entry and the period.
• Always say why Ind AS 20 does not apply. Check whether the asset is at fair value less costs to sell or at cost, and whether it is a bearer plant.
• Show journal entries for advance cash. Examiners reward the liability entry and the later transfer to profit or loss.
• Add the disclosure points if marks allow: grants recognised, unfulfilled conditions and contingencies, and expected significant decreases in grants.