Revised IAS 16 Property, Plant and Equipment and IAS 41 Agriculture for ‘Bearer plants’

What are the revised IAS 16/IAS 41 standards?

Currently biological assets (plants) are measured at fair value less costs to sell. The reason for this is that biological assets undergo changes during their lives that are best represented by fair value, (i.e. the market value of the plants and produce).

Under the revised IAS 16 and IAS 41 standards, certain biological assets, those which are used solely to produce fruit and produce (‘bearer plants’), will be measured under IAS 16 – Property, Plant and Equipment.

Why would we measure a plant as property, plant and equipment?

The IASB consider these bearer plants bear more resemblance to machinery and equipment (IAS 16) than other biological assets (under IAS 41). How can this be?

  • Once mature, the value (future economic benefits) in the bearer plant is derived from its produce, not its own use/growth
  • The bearer plant has a useful life similar to machinery
  • The bearer plant is usually scrapped at the end of its useful life, like machinery

What are bearer plants?

Bearer plants are plants which:

  • Are expected to be used for more than one period
  • Used in the production/supply of agricultural produce
  • Not intended to be sold as produce (or a living plant) in themselves, but may be sold for scrap

The IASB provide examples of:

  • grape vines
  • rubber trees
  • oil palms

The following are not bearer plants:

  • Trees used for lumber
  • Plants cultivated for sale only (e.g. in a garden centre)
  • Annual crops (e.g. wheat)
  • Produce growing on a bearer plant (e.g. grape on a vine)

How do we record bearer plants in our financial statements? What goes where?

Bearer plants will be measured under IAS 16 – Property, Plant and Equipment.

Produce from bearer plants will continue to be measured under IAS 41 – Agriculture.


How do we grants for bearer plants under the revised standard?

Since bearer plants will be recognised under IAS 16, any associated grants will be recognised under IAS 20.

Old way

Unconditional grants:

  • Grants measured as income when grant becomes receivable

Conditional grants:

  • Recognise as income when conditions are met.

Revised IAS 16/41

For bearer plants, grants are:

  • Recognised as deferred income, and then recognised in P&L on a systematic basis over the life of the asset, or
  • Deducted from the carrying amount of the asset, and recognised in the P&L as a reduction in depreciation expense.

When will the revised IAS 16 standard be effective?

The IASB have indicated the revised IAS 16 and IAS 41 standards will be effective for financial periods beginning on or after 1 January 2016. Early application is permitted.