Financial Reporting · Inventories and agriculture

IAS 41 Government Grants and Bearer Plants Explained

Updated 11 October 2026 · Fact-checked

Under IAS 41, an unconditional government grant for a biological asset measured at fair value less costs to sell is recognised in profit or loss when it becomes receivable. A conditional grant is recognised only when the conditions are met. Bearer plants are not IAS 41 assets: you account for them under IAS 16.

Understand IAS 41 Government Grants and Bearer Plants

IAS 41 covers biological assets (living animals and plants), and agricultural produce at the point of harvest. Biological assets are measured at fair value less costs to sell, and changes in that value go to profit or loss. Government help is common in farming, so IAS 41 has its own grant rule for these assets.

The rule depends on conditions. An unconditional grant related to a biological asset measured at fair value less costs to sell is recognised in profit or loss when it becomes receivable. A conditional grant (for example, you must farm a particular area for five years) is recognised in profit or loss only when the conditions are met. If the conditions are not yet met, the amount received is a liability (deferred income).

This differs from IAS 20, which normally spreads grants over the life of the related cost or asset. Under IAS 41 there is no spreading, because the asset is already at fair value and its changes go through profit or loss. The IAS 41 rule applies only where the biological asset is at fair value less costs to sell. If the biological asset is measured at cost (the rare case where fair value cannot be measured reliably), IAS 20 applies instead. Grants relating to bearer plants also fall under IAS 20, because bearer plants are not IAS 41 assets.

A bearer plant is a living plant that is used to produce agricultural produce, is expected to bear produce for more than one period, and has a remote likelihood of being sold as agricultural produce (other than incidental scrap sales). Examples are tea bushes, grape vines, rubber trees and oil palms. Bearer plants are accounted for as property, plant and equipment under IAS 16, at cost or revaluation, and depreciated. The produce growing on the bearer plant (tea leaves, grapes, latex) stays in IAS 41 at fair value less costs to sell.

Annual crops such as wheat or maize are not bearer plants. They are consumed or sold as produce. Plants grown to be harvested as produce, such as trees grown for timber, are also not bearer plants. These stay in IAS 41. Cattle are animals, not plants, so they are also IAS 41 biological assets and not bearer plants.

Key rules to remember

Bearer plant definition: Living plant + used to produce produce + bears for more than one period + remote chance of sale as produce (except incidental scrap); All conditions must be met. If so, use IAS 16, not IAS 41.
Accounting for bearer plants: Cost (or revaluation) less accumulated depreciation and impairment, under IAS 16; Depreciate over useful life from when the plant is mature and ready to bear produce. Before that, costs of growing it are capitalised.
Produce growing on a bearer plant: Fair value less costs to sell (IAS 41); Changes in value go to profit or loss. At harvest, produce moves to IAS 2 at fair value less costs to sell at that date.
Unconditional grant (biological asset at fair value less costs to sell): Recognise in profit or loss when receivable; No deferral. Applies under IAS 41.
Conditional grant (biological asset at fair value less costs to sell): Recognise in profit or loss only when conditions are met; Until then, hold as a liability (deferred income).
Grants relating to bearer plants: Apply IAS 20; Treat as a grant related to an asset: deferred income or deduct from the carrying amount, then release over the asset's life.

How to solve IAS 41 Government Grants and Bearer Plants questions

Use this order for any question on agricultural grants or bearer plants.

1Identify what the asset is: animal, annual crop, tree grown for timber, or a plant that bears produce year after year.
2Apply the bearer plant test. If it is a living plant that bears produce for more than one period and is not likely to be sold as produce, it is an IAS 16 asset.
3Separate the plant from its produce. Bearer plant goes to IAS 16. Produce growing on it goes to IAS 41 at fair value less costs to sell.
4Identify the grant and decide what it relates to: an IAS 41 asset at fair value, or a bearer plant (IAS 20).
5If IAS 41 applies, test the conditions. Unconditional: income when receivable. Conditional: income when conditions are met; before that, a liability.
6If IAS 20 applies (bearer plant), treat it as an asset grant: deferred income or deduction from cost, released over the useful life.
7Calculate the numbers: depreciation, grant income, deferred income, and the gain on the produce. Show each line.
8State the statement of financial position and profit or loss effect clearly, with the standard named.

Quickest way: Three-question triage

When to use it: Use this in Section A and B objective questions where you have about three minutes per question.

Ask: does the plant bear produce for more than one period? If yes and it is not sold as produce, it is a bearer plant under IAS 16.
Ask: is the grant on an IAS 41 asset? If yes, unconditional means income now and conditional means income when conditions are met.
Ask: is the grant on a bearer plant? If yes, use IAS 20, so it is spread over the asset's life.
Check which option mentions the wrong standard or wrong timing and eliminate it.

Common mistakes in IAS 41 Government Grants and Bearer Plants

Measuring a bearer plant at fair value less costs to sell under IAS 41.
Students remember that plants are biological assets and stop there.
Fix: Remember the 2014 change: bearer plants are in IAS 16. Only the produce growing on them is in IAS 41.
Treating all trees as bearer plants.
Students match on the word plant or tree without reading the definition.
Fix: Check the purpose. Trees grown to be felled for timber are harvested as produce, so they remain IAS 41 assets. Fruit trees that bear fruit year after year are bearer plants.
Spreading an unconditional IAS 41 grant over several years.
Students carry over the IAS 20 approach.
Fix: For an IAS 41 asset at fair value less costs to sell, an unconditional grant goes to profit or loss when receivable.
Recognising a conditional grant as income on receipt.
Cash received feels like income.
Fix: If conditions are unmet, record a liability. Release to profit or loss only when the conditions are met.
Applying IAS 41 grant rules to grants on bearer plants.
The grant is in an agriculture scenario, so students assume IAS 41.
Fix: Bearer plants are IAS 16 assets, so IAS 20 governs the grant.
Depreciating a bearer plant from planting date.
Students start depreciation as soon as the plant is bought.
Fix: Costs to bring the plant to maturity are capitalised. Depreciate once it is mature and capable of bearing produce.

Worked examples

Example 1

Farmco receives a $60,000 government grant on 1 July 20X5 to support its dairy herd, which is measured at fair value less costs to sell. The grant is unconditional. Farmco's year end is 31 December 20X5. How is the grant accounted for?

Show the solution

The dairy herd is an animal, so it is an IAS 41 biological asset at fair value less costs to sell.
The grant relates to an IAS 41 asset and is unconditional.
Under IAS 41, an unconditional grant is recognised in profit or loss when it becomes receivable.
It became receivable on 1 July 20X5, so the full amount is income in the year to 31 December 20X5.
No deferred income is held at the year end.

Answer: Recognise the full $60,000 as income in profit or loss for the year ended 31 December 20X5. No liability remains.

Example 2

On 1 January 20X5 Teaco buys tea bushes for $500,000 that are mature and ready to bear leaf. Useful life is 20 years, straight line, no residual value. The same day it receives a $100,000 government grant for the bushes, which is treated as deferred income under IAS 20. At 31 December 20X5 the unpicked leaf on the bushes has a fair value less costs to sell of $18,000 (nil at the start of the year). Show the effects for the year.

Show the solution

Tea bushes are bearer plants (plants bearing produce for more than one period), so they are IAS 16 assets at cost.
Depreciation = $500,000 ÷ 20 = $25,000. Carrying amount at 31 December 20X5 = $475,000.
The grant relates to a bearer plant, so IAS 20 applies. Release over 20 years: $100,000 ÷ 20 = $5,000 income for the year.
Deferred income at year end = $100,000 − $5,000 = $95,000.
The growing leaf is agricultural produce on the bearer plant, so it is IAS 41 at fair value less costs to sell.
Gain on the leaf = $18,000 − nil = $18,000 in profit or loss.

Answer: Tea bushes carried at $475,000 (depreciation $25,000). Grant income $5,000, deferred income $95,000 at year end. The leaf gain of $18,000 is recognised in profit or loss, and the leaf is shown as a biological asset at $18,000.

Exam tips

Always name the standard. Marks in constructed response answers go to the correct IAS 16, IAS 20 or IAS 41 reference.
In objective questions, look for the bearer plant trap: a vine, tea bush or rubber tree is IAS 16, but wheat, timber trees and livestock are IAS 41.
Read grant wording for conditions. Words such as must, provided that, or for five years signal a conditional grant.
Keep the plant and its produce separate in calculations. Show depreciation for one and fair value movement for the other.
Objective questions are all or nothing, so check both the standard and the timing before choosing an answer.

Practice questions from Inventories and agriculture

IAS 41 Government Grants and Bearer Plants in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

IAS 41 Government Grants and Bearer Plants: frequently asked questions

What is a bearer plant in ACCA FR?

A bearer plant is a living plant used to produce agricultural produce, expected to bear produce for more than one period, with a remote chance of being sold as produce except as incidental scrap. Examples are tea bushes, vines and oil palms. It is accounted for under IAS 16.

Why are bearer plants under IAS 16 and not IAS 41?

Once mature, a bearer plant works like a machine: it is used to generate produce year after year. Cost or revaluation less depreciation reflects this better than fair value changes. The produce growing on the plant is still in IAS 41.

How are conditional and unconditional agricultural grants treated?

For an IAS 41 asset at fair value less costs to sell, an unconditional grant is income when it becomes receivable. A conditional grant is income only when the conditions are met. Until then it is a liability.

Does IAS 41 grant treatment apply to grants on bearer plants?

No. Bearer plants are IAS 16 assets, so grants relating to them follow IAS 20. You normally release the grant over the useful life of the plant, either as deferred income or by deducting it from the asset's cost.