Agriculture Advisory Group
May 8 and May 24, 2017
The Agriculture Advisory Group’s purpose is to advise the Accounting Standards Board (AcSB) on the development of authoritative guidance related to the accounting for biological assets and agricultural produce in Part II of the CPA Canada Handbook – Accounting. The Group provides advice to the AcSB but is not authorized to interpret or provide authoritative guidance on accounting standards for private enterprises (ASPE).
This document has been prepared by the staff of the AcSB and is based on discussions during the Group’s meeting. The meeting notes do not necessarily represent the views of the AcSB and nothing in them constitutes authoritative guidance on acceptable or unacceptable application of ASPE. Only the AcSB can make such a determination.
The Group received an orientation session that included an overview of the standard-setting process, the Board’s Strategy for Private Enterprises, as well as the Group’s mandate and responsibilities.
Terms of Reference and Statement of Operating Procedures
The Group considered its objectives as established by the AcSB, the expectations that the Board has of the Group and its responsibilities to Board as documented and approved by the Board in the Group’s Terms of Reference. The Group also discussed and approved its Statement of Operating Procedures, which the AcSB will ratify in June 2017.
Staff provided an education session for the Group, to summarize:
- the Board’s preliminary views as presented in its Discussion Paper, “Agriculture”;
- stakeholder feedback received on the Board’s preliminary views; and
- the Board’s decisions on the key issues raised in response to the Discussion Paper.
Definitions and Scope
The Group explored several key issues relating to definitions and scope that stakeholders raised in response to the Discussion Paper, and provided input on the staff’s proposals on how to address these concerns.
Government Grants, Land and Quotas
The Group supported the AcSB’s preliminary view that government grants, land and quotas should be excluded from the scope of the authoritative guidance.
Grain Elevators and Related Hedges
The Group discussed whether grain-elevator operations should be included within the scope of the authoritative guidance. The Group was concerned that agricultural producers may also engage in grain-elevator operations, and consequently it might be difficult for such entities to apply different sections of the Handbook in preparing their consolidated financial statements.
Purchased and Grown Agricultural Produce
The Group discussed how to change the scope to reflect the Board’s March 2017 decision to include purchased agricultural produce within the scope of the authoritative guidance. The Group supported the staff’s proposal that the guidance developed should refer to and define agricultural producers rather than agricultural activity.
The Group thought that it was unclear whether entities involved in aquaculture would be in the scope of the authoritative guidance, and that the definition of agricultural producers should be expanded to include aquaculture explicitly, as well as provide additional examples for greater clarity.
Productive Biological Assets and Agricultural Inventories
The Group discussed proposed definitions for the two broad categories of assets, along with several examples for each category. The Group was concerned about a couple of the examples provided for agricultural inventories, and will further explore these categories and definitions at a future meeting.
The Group explored several key issues relating to measurement, which stakeholders raised in response to the Discussion Paper, and provided input on the staff’s proposals on how to address these concerns.
Type of Current Value
The Group thought that net realizable value was the most appropriate measure of current value for agricultural inventories.
Conditions for Current Value
The Group discussed the conditions under which it would be appropriate to measure agricultural inventories at current value, and will explore specific wording that will ensure clarity and a common understanding of the terminology at a future meeting.
Accounting Policy Choice for Measurement of Unharvested Crops
The Group thought that an accounting policy choice should be provided to allow for the measurement of agricultural inventories at cost using:
- input costs only; or
- full cost.
The Group will explore the types of costs that could be required under each option at a future meeting.
The Group thought that the input costs of agricultural inventories should include the carrying value of seeds and/or other inputs that are grown or otherwise produced by the agricultural producer.
Close to Harvest
The majority of Group members thought that professional judgment should be used when determining the measurement basis in cases where a crop is harvested prior to year-end in one year, but remains unharvested at year-end in a comparative period.
Accounting Policy Choice for Measurement of Productive Biological Assets
The Group thought that an accounting policy choice should be provided, which would allow for the measurement of productive biological assets at cost using:
- direct costs only; or
- full cost.
The Group will explore the specific types of costs that could be included under each option at a future meeting.
The Group discussed the complexities associated with amortization, and agreed that there are practical difficulties with determining and recording amortization when the unit of account is a group of assets (i.e., a herd) as opposed to the individual asset.
The Group thought that guidance should include a rebuttable presumption that an animal is held for sale unless it is being used in a productive capacity.
The Group thought that a practical expedient should be provided, which would allow agricultural producers to use a productive animal’s replacement cost as its deemed cost on the date that it is transferred to a productive capacity.
The Group thought that an animal culled from a herd, and no longer held in a productive capacity, should be measured on a basis consistent with the guidance in Section 3475, Disposal of Long-lived Assets.
The Board will consider the Group’s feedback as it further deliberates these topics.