|Current Status||Next Steps|
Exposure draft being developed.
AcSB plans to issue an exposure draft no later than Q3 2018.
Currently, there is a significant diversity in practice regarding the accounting for biological assets.
The AcSB has been informed that this diversity is causing significant problems for a number of stakeholders – primarily financial statement users.
Issues to be addressed by this project include:
- when a biological asset should be recognized;
- how it should be measured on initial recognition;
- how it should be measured in subsequent periods;
- how agricultural produce should be accounted for; and
- what disclosures should be required.
PROJECT NEWS & DECISION SUMMARIES
AcSB Decision Summary – December 14, 2017
The Board considered the drafting of the proposed new Section and directed the staff to develop the elements of cost that are included when full cost is not used to measure agricultural inventories.
In addition, the Board decided:
- that amortization should not be required when productive biological assets are managed and accounted for on a group basis and the useful life and productive capacity of the group does not change significantly over time;
- to confirm the preliminary views outlined in the Discussion Paper, “Agriculture,” regarding presentation and impairment; and
- in addition to the disclosures outlined in the Discussion Paper, agricultural producers must disclose:
- quantities of agricultural inventories and productive biological assets when practical; and
- their accounting policy when determining cost and information about unallocated costs.
The Board also directed the staff to arrange the fatal-flaw review and the field test of the proposed new Section. The Board will consider this feedback in March 2018 and plans to issue an exposure draft no later than the third quarter of 2018.
Private Enterprise Advisory Committee Notes – November 7, 2017
The Committee received an update on the project’s status and the Board’s discussions at its September 20-21, 2017 meeting. Committee members also considered proposals for:
- recognition of unharvested crops and unborn animals as assets;
- categorization of assets as productive biological assets and agricultural produce;
- cost as the measurement basis for productive biological assets;
- the use of and the conditions for an exception to measure some agricultural produce at net realizable value;
- need for classification guidance for gains/losses due to changes in net realizable value;
- complexities with tracking and allocating cost; and
- disclosure requirements.
Committee members discussed the consistency of the proposals with other sections of Part II.
AcSB Decision Summary – November 20-21, 2017
The Board considered further advice from its Agricultural Advisory Group on how to measure biological assets.
The Board considered how to reduce the complexity for stakeholders when determining cost of some agriculture inventories. The Board decided that, consistent with Section 3031, Inventories, the standard on Agriculture should permit:
- the use of techniques and formulas such as the standard cost and retail methods, when the results approximate cost; and
- the allocation of an agricultural producer’s costs of conversion between products on a rational and consistent basis.
The Board also decided to expose the option to measure agricultural inventories using direct costs. While full cost may provide better information to users of financial statements, the Board decided to allow agricultural producers to exclude their indirect costs to reduce complexity in measuring agricultural inventories. The Board will consider the need for additional disclosures when agricultural inventories are not measured at full cost in December 2017.
Conditions for net realizable value
The Board decided to expose for comment that agricultural inventories may be measured at net realizable value when all of the following conditions are met:
- the product has a reliable, readily determinable, and realizable market price;
- the product has relatively insignificant and predictable costs of disposal; and
- the product is available for immediate delivery.
The Board decided that:
- the new standard on Agriculture should be applied retrospectively, with transition relief for agricultural producers to choose:
- on an asset-by-asset basis to measure biological assets at net realizable value as deemed cost at the opening balance sheet date; and
- to not change the accounting for assets that are derecognized before the effective date;
- agricultural producers should provide disclosures about the use of net realizable value as deemed cost in its first financial statements prepared under the new standard; and
- the transition relief to use net realizable value as deemed cost of biological assets should be made available to agricultural producers when adopting the accounting standards for private enterprises for the first-time.
Board members reviewed and provided feedback on a preliminary draft of the new standard, and will consider a revised draft in December 2017. The Board will issue an exposure draft of the new standard no later than September 30, 2018.
AcSB Decision Summary – September 20-21, 2017
The Board deliberated the remaining issues related to the project scope, recognition and measurement, and made the following decisions:
The Board affirmed its preliminary view that timber producers should be included within the scope of the project, and directed staff to seek feedback on its proposals from stakeholders with knowledge of that industry.
With regards to the remaining issues related to measurement, the Board decided:
- to clarify that cost is the most relevant measurement basis for agricultural inventories, and that net realizable value would be only permitted as a practical expedient under certain conditions.
- to obtain advice from its Agricultural Advisory Group on how possible conditions to determine when agricultural inventories would be measured at net realizable value could be modified to better meet Canadian stakeholders’ needs.
- not to provide further guidance on how unrealized gains and losses recognized in income would be presented on the face of the income statement as similar guidance is not provided for other industries in the existing standards. The Board will consider the need for disclosure about these unrealized gains and losses in November 2017.
- not to provide guidance on how to determine the unit of account for groups of productive biological assets or agricultural inventories as similar guidance is not provided for other industries in the existing standards.
- that the elements of cost for agricultural inventories and productive biological assets should be consistent with the current guidance in accounting standards for private enterprises. However, Board members asked for advice from its Agricultural Advisory Group on how to reduce the complexity for stakeholders when determining cost:
- through the use of techniques and formulas; as well as
- providing a practical expedient to exclude costs of conversion that cannot be allocated without undue cost or effort.
- to direct staff to begin drafting proposals to address the classification and measurement of productive biological assets when they undergo a change in use.
- that the current proposals are sufficient to capture challenges that stakeholders have raised in relation to products such as plant clippings, cannabis and perennial plants.
The Board also decided that guidance on Agriculture should be issued in the form of a separate standard rather than as amendments to existing standards in Part II of the Handbook. Board members agreed that Section 3041 should be reserved for this guidance.
The Board considered a revised project timeline and decided to postpone issuing the exposure draft to no later than the third quarter of 2018. The additional time is to consider how the proposed new standard will respond to the sector’s needs.
Agriculture Advisory Group Meeting Notes – June 21, 2017
August 24, 2017. The Group discussed issues related to unit of account, unborn animals, impairment, presentation and disclosure.
Agriculture Advisory Group Meeting Notes – May 8 and May 24, 2017
August 24, 2017. The Group explored several key issues relating to scope, definitions and measurement that stakeholders raised in response to the Discussion Paper, and provided input on how to address these concerns.
AcSB Decision Summary – July 13, 2017
The Board reviewed the progress made in deliberating the feedback received from stakeholders and its Agricultural Advisory Group. The Board directed staff to provide additional analysis on several issues, and develop a plan to conduct field-testing on the application of the proposals.
The Board will consider the remaining issues, as well as next steps and the project timeline to issue an exposure draft, at its next meeting.
AcSB Decision Summary – June 22, 2017
The Board continued its deliberations on the key issues raised by stakeholders and considered advice of its Agriculture Advisory Group on several topics related to the project scope and definitions, and measurement.
Scope and definitions
The Board decided that the scope of the proposed guidance should be similar to that provided by U.S. GAAP, by defining and referring to agricultural producers, rather than agricultural activity. As a result, agricultural inventories would be within the scope of the project when they are held by an enterprise that is an agricultural producer, regardless of whether or not they are the output of that enterprise’s agricultural activity.
Conversely, inventories acquired by enterprises that do not meet the definition of an agricultural producer, such as secondary processors (for example, flour mills), retailers (for example, pet shops) or broker-traders (for example, grain elevators), would remain in the scope of Section 3031, Inventories.
The Board also agreed that the definition of agricultural producers should be expanded to explicitly include aquaculture, as well as provide additional examples for greater clarity.
The Board reaffirmed its decision that government grants, land and quotas are not within the scope of this project.
The Board decided that agricultural producers should measure:
- agricultural inventories at current value when conditions are met, or at cost; and
- productive biological assets at cost.
When determining cost, the Board decided to provide the option to use either direct costs only, or full cost. The Board will decide on the specific costs to be included under each approach after receiving further advice from its Agriculture Advisory Group.
The Board also agreed that providing some practical expedients may be useful to stakeholders in determining cost, and that they be provided when they will reduce complexity for preparers yet provide useful information to users.
The Board also discussed whether amortization should be required when productive biological assets are managed and accounted for on a group basis, and the useful life and productive capacity of the group does not change significantly over time. Board members will further consider the need to amortize a group of assets at a future meeting.
When determining current value, the Board considered the advice of its Agriculture Advisory Group and agreed that the most appropriate measure of current value for agricultural inventories is net realizable value. The Board will decide the conditions on when agricultural inventories may be measured at net realizable value instead of cost, after considering further input from the Agriculture Advisory Group.
Private Enterprise Advisory Committee Notes – May 25, 2017
The Committee received an update on the status of the project and discussions of the Agriculture Advisory Group at its May 24, 2017 meeting.
FYI Article – Breaking New Ground: AcSB Sets Up Agriculture Advisory Group!
May 17, 2017. The AcSB establishes Agriculture Advisory Group to provide input on agriculture guidance being developed.
AcSB Decision Summary – March 21-22, 2017
The AcSB considered feedback from additional consultations held with users of financial statements on its Discussion Paper, “Agriculture,” and continued its deliberations on the key issues raised by stakeholders.
Measurement – Underlying Principle
AcSB members decided that specifying an underlying measurement principle would be useful to stakeholders and that this principle should be based on an agricultural producer measuring its transactions rather than the biological transformation of its assets. In addition, the feedback received assisted the AcSB in determining that:
- the overall measurement principle should be applied to two broad categories encompassing items that had been previously been broken down into five categories specified in the AcSB’s Discussion Paper; and
- the corresponding measurement basis of the categories should be cost and current value.
Project Scope – Purchased Agricultural Produce
The AcSB further considered the approach taken by the IASB and the U.S. Financial Accounting Standards Board. The AcSB observed that IFRSs excludes both grown and purchased agriculture produce from the scope of IAS 41 Agriculture whereas U.S. GAAP includes both within the scope of Accounting Standards Codification, Topic 905, Agriculture. The AcSB decided to include purchased agricultural produce within the scope of its project as long as purchases by enterprises that are not producers, such as a flour mill or a pet shop, remain out of scope.
Measurement – Unharvested Crops and Bearer Animals at Cost
The AcSB observed that many financial statement users have indicated that a cost-based measure for unharvested crops and bearer animals provides the information they need to make lending decisions. However, those users and other stakeholders have raised practical concerns about recognizing and measuring these assets at cost. The AcSB decided to explore developing a cost-based measure that requires only direct costs to be reflected and uses other practical expedients to respond to the concerns raised by stakeholders.
The AcSB is forming a new Agriculture Advisory Group, comprised of agricultural experts, to help develop proposals that will meet the sector’s needs. The AcSB directed staff to obtain advice from the Group on these decisions as well as the other complex issues raised by stakeholders. The AcSB plans to issue an exposure draft for public comment no later than the first quarter of 2018.
Private Enterprise Advisory Committee Notes – February 2, 2017
The Committee received an update on the status of the project, the formation of the new Agriculture Advisory Group and the project timeline.
Volunteer Opportunity – Agriculture Advisory Group
January 3, 2017. The AcSB has extended its application deadline for its new Agriculture Advisory Group to January 16, 2017. If you have an interest in accounting standards for the agriculture sector, please submit a resumé.
AcSB Decision Summary – December 15, 2016
The AcSB approved a standards-level project to develop authoritative guidance after considering the input received from stakeholders on its Discussion Paper, “Agriculture.”
During 2017, the AcSB plans to develop an exposure draft of a new standard in accordance with its due process. The AcSB expects to issue the exposure draft for public comment in the first quarter of 2018.
The AcSB encourages stakeholders interested in volunteering for its new Agriculture Advisory Group to submit a resumé by January 16, 2017.
AcSB Decision Summary – November 21-22, 2016
The AcSB considered the responses received on its Discussion Paper, “Agriculture,” as well as the results of the roundtable discussions. The AcSB agreed with its Private Enterprise Advisory Committee that several key issues have emerged from this feedback. No decisions were made.
The AcSB requested that additional consultations with financial statement users be undertaken.
The AcSB encourages stakeholders interested in volunteering for its new Agriculture Advisory Group to submit a résumé by January 3, 2017.
Volunteer Opportunity – Agriculture Advisory Group
November 15, 2016. The AcSB is seeking volunteers for its new Agriculture Advisory Group. If you have an interest in accounting standards for the agricultural sector, please submit a resumé by January 3, 2017.
Private Enterprise Advisory Committee Notes – October 6, 2016
The Committee received a summary of the feedback received on the AcSB’s Discussion Paper, “Agriculture,” issued in December 2015. The Committee discussed the following issues raised by stakeholders through comment letters and roundtable discussions and agreed that they warranted further consideration by the AcSB.
Project Scope – Purchased Agricultural Produce
Many respondents were concerned with the exclusion of purchased agricultural produce (such as feed for animals) from the scope of the project because it would not be practical for agricultural enterprises that produce and maintain inventories of agricultural produce for use in their operations. For example, a significant number of agricultural enterprises grow their own feed and purchase additional feed when needed. Respondents explained that it would not be realistic or meaningful to measure this inventory differently in an enterprise’s financial statements because the value of the inventory to the enterprise is the same regardless of origin. The Committee recommended that the AcSB further consider this issue, specifically with regard to the different approaches taken by the International Accounting Standards Board and the U.S. Financial Accounting Standards Board.
Recognition – Unharvested Crops
Most respondents agreed with the AcSB’s preliminary view that biological assets should be recognized when they meet the definition of an asset and the recognition criteria in Section 1000, Financial Statement Concepts. However, many respondents also expressed the view that unharvested crops should not be recognized in financial statements due to the uncertainty of obtaining future benefits. The Committee noted that several respondents expressed concern that there would be little benefit to recognizing annual crops at cost because of the short cycle and a significant amount of effort would be required to determine cost.
Measurement – Underlying Principle
Some respondents suggested that guidance developed for the agricultural sector should follow a principles-based approach for all biological assets and agricultural produce, rather than a mixed measurement model as proposed in the Discussion Paper. One Committee member noted that mixed measurement models are used elsewhere in ASPE, so the proposed model is consistent with other elements of Part II of the Handbook. Other Committee members thought that a principles-based approach might lead to a more cohesive standard.
Measurement – Unharvested Crops at Cost
Several respondents disagreed with the AcSB’s preliminary view that unharvested crops should be measured at cost because of the significant uncertainty of future benefits to be obtained and the complexities in determining cost. The Committee noted that many enterprises currently expense the costs of planted annual crops.
Measurement – Bearer Animals at Cost
The majority of respondents disagreed with the AcSB’s preliminary view that bearer animals should be measured at cost because it is unclear why bearer animals would be measured differently than animals held for sale and there are significant complexities in determining cost. The Committee agreed these complexities should be considered in the development of authoritative guidance for the agricultural sector.
Measurement – Change in Use
Respondents raised concerns with a change in the measurement basis for certain biological assets should there be a change in use (i.e., from a bearer animal at cost to an animal held for sale at current value when certain conditions are met and vice versa). The Committee agreed that this was an issue, particularly with regard to bearer animals and animals held for sale, when management’s intended use may be uncertain, or change based on market or other conditions.
The Committee also discussed the following:
- One Committee member noted that U.S. GAAP allows an accounting policy choice and recommended that the AcSB continue to consider allowing an accounting policy choice for agricultural assets. Other Committee members noted that there was unanimous support for the AcSB’s preliminary view that authoritative guidance should be developed for the agricultural sector and the purpose of this guidance would be to improve comparability in financial reporting. These members thought that allowing an accounting policy choice would not accomplish this goal.
- One member thought that the reality of the agricultural sector was that land and quotas were inextricably linked to the financial results and reporting of agricultural enterprises Therefore, they should be included in the project scope.
- Committee members thought that some of the definitions proposed in the Discussion Paper were unclear. Specifically, definitions for bearer plants, unharvested crops and agricultural produce (i.e., in the context of an apple tree, with unharvested apples that will become agricultural produce after harvest) were unclear. The Committee thought that further consideration needed to be given to definitions at the various stages of production to ensure that the guidance is clear.
AcSB Decision Summary – September 21-22, 2016
The AcSB approved the creation of an agriculture advisory committee to further assist the Board with this project. An invitation soliciting interest will be posted online shortly at www.frascanada.ca.
Rescheduled Fall 2016 Roundtable Discussions – Stakeholders’ Views Sought on the Agriculture Project
September 7, 2016. The AcSB has been meeting with stakeholders across the country to gather views on its Discussion Paper, “Agriculture.” We have rescheduled our remaining roundtables in an effort to reach as many stakeholders as possible. Complete the registration form to confirm your attendance!
AcSB Decision Summary – July 20, 2016
The AcSB was updated on the responses to its Discussion Paper, “Agriculture,” as well as the results of the roundtable discussions held to date with stakeholders. The AcSB discussed some of the key themes and complexities emerging from this feedback. No decisions were made.
The AcSB encourages stakeholders in British Columbia, Saskatchewan and Quebec to register for one of the roundtables being held this fall.
Roundtable Discussion – Stakeholders’ Views Sought on the Agriculture Project
May 20, 2016. The AcSB is holding roundtable discussions to hear your views on our Agriculture project. Discussions are taking place in cities across the country. Complete the registration form to attend the roundtable of your choice!
Survey – Where Should the AcSB Hold its Agriculture Roundtables?
April 12, 2016. The AcSB will be hosting in-person roundtable discussions on its Discussion Paper this summer. Help us decide which Canadian locations to visit by completing this short, four-question survey by May 5, 2016.
CPA Magazine – Standards Digest – March 2016
March 8, 2016. CPA Magazine’s Standards Digest is a monthly snapshot into some of the latest standard-setting news and issues. This month, read about the AcSB’s Agriculture project and long-time PSAB Director Tim Beauchamp’s retirement.
FYI Article – Explore the AcSB’s Discussion Paper on Agriculture
February 19, 2016. Your input is needed! How should private enterprises account for living plants and animals and the harvested products from those plants and animals? Find out about the AcSB’s preliminary views.
AcSB Decision Summary – December 15, 2015
The AcSB approved its consultation plan for the Discussion Paper, “Agriculture,” (subsequently issued on December 18, 2015). The AcSB encourages stakeholders to:
- attend the webinar on January 13, 2016 (French) and January 19, 2016 (English);
- participate in cross-country roundtables and conference calls planned for May and June 2016, details to be announced on the project page; and
- provide written comments by May 19, 2016.
Discussion Paper – Agriculture
December 18, 2015. The AcSB has issued a Discussion Paper that considers issues in accounting for biological assets and agricultural produce. Stakeholders are encouraged to submit their comments, on the form provided, by May 19, 2016.
Private Enterprise Advisory Committee Notes – December 1, 2015
The Committee held an education session on the AcSB’s forthcoming Discussion Paper, which will be issued in December 2015. The Committee encourages stakeholders to:
- attend the webinar, “Explore the AcSB’s Discussion Paper on Agriculture,” on January 13, 2016 (French) and January 19, 2016 (English);
- participate in cross-country roundtables and conference calls planned for May and June 2016 – details to be announced in due course on the project page; and
provide written comments , which will be due in May 2016.
Webinar – Explore the AcSB’s Discussion Paper on Agriculture
December 9, 2015. Tune in to this webinar on January 13, 2016 (French) and January 19, 2016 (English) to learn about the approaches that the AcSB is considering in how private enterprises should account for biological assets and agricultural produce.
AcSB Decision Summary – October 20, 2015
The AcSB considered comments from external reviewers of its draft discussion paper. The AcSB decided that determining whether biological assets are inventories or property, plant and equipment should be considered after deliberating the feedback from the discussion paper. The discussion paper will not include this issue. The AcSB discussed the measurement of agricultural produce and animals held for sale and decided to express a preliminary view of measuring these types of biological assets at current value when certain conditions are met, and cost when those conditions are not met. The draft discussion paper will seek comments on the conditions that would help determine when a current value measurement is appropriate. The AcSB decided the discussion paper should include potential disclosures related to current value.
The AcSB also decided that the scope should include biological assets and agricultural produce that meet the definition of agricultural activity.
The AcSB decided to issue its discussion paper with a 150-day comment period to provide stakeholders with sufficient time to formulate responses. The AcSB expects to issue the discussion paper in December 2015.
AcSB Decision Summary – May 25-26, 2015
The AcSB discussed the progress and next steps for the discussion paper. The AcSB expects to issue the discussion paper in the fourth quarter of 2015 with a 120-day comment period.
AcSB Decision Summary – July 16, 2014
The AcSB reviewed the project’s proposed timeline. The AcSB decided to issue its discussion paper with a 120-day comment period to provide stakeholders with additional time to formulate responses. The AcSB continues to expect to issue the discussion paper in the fourth quarter of 2014.
AcSB Decision Summary – May 14-15, 2014
The AcSB reviewed and approved a discussion paper, subject to reviewing drafting changes. The staff was asked to reconsider the timeline for completing and issuing the document and the length of the comment period stakeholders would need in which to formulate responses.
AcSB Decision Summary – May 14-15, 2013
The AcSB discussed the contents of its forthcoming discussion paper in respect of impairment, presentation and disclosure.
The AcSB agreed that the discussion paper should present a view that biological assets are inventories or property, plant and equipment, and the impairment model applied should reflect an asset’s classification. The AcSB also agreed that biological assets should be presented on the balance sheet in accordance with the existing standards for inventories and property, plant and equipment.
The AcSB reviewed a list of potential disclosures for inclusion in the discussion paper and expressed a preference for a subset of these disclosures.
The AcSB directed staff to proceed with drafting the discussion paper. The AcSB expects to issue the discussion paper in the fourth quarter of this year.
AcSB Decision Summary – March 19-20, 2013
The AcSB agreed on the list of issues that will be addressed in a discussion paper being developed on this topic. The discussion paper will specifically ask whether the list of issues to be addressed in a standard is complete.
The AcSB agreed that the scope of the project should be consistent with that of IAS 41 Agriculture. It also agreed to adopt the definitions for agricultural activity, agricultural produce and biological assets set out in IAS 41.
The AcSB considered alternative approaches to be included in the discussion paper in respect of the scope of the proposed standard, when a biological asset should be recognized and the measurement basis for biological assets.
The AcSB agreed that the discussion paper should address recognition of biological assets, specifically noting that recognition will be based on the definition of an asset as set out in Section 1000, Financial Statement Concepts.
The AcSB discussed alternative approaches in respect of initial and subsequent measurement of biological assets, as well as measurement post-harvest. The AcSB agreed to express a preliminary view in favour of historical cost as a measurement basis.
Further discussions regarding this topic will be held at a future meeting.
Private Enterprise Advisory Committee Notes – September 21, 2012
The Committee continued its discussions on this topic. It is expected that a discussion paper setting out the alternative approaches and expressing a preferred approach will be issued in the second quarter of 2013. The Committee discussed and provided recommendations in respect of presentation, disclosure, and impairment.
Private Enterprise Advisory Committee Notes – June 18, 2012
The Committee continued its discussions on this topic. The project is working towards issuing a discussion paper that will set out alternative treatments for biological assets.
The Committee discussed several detailed illustrative examples in respect of practical issues with the identified measurement alternatives. Based on these discussions the Committee agreed that there are three measurement alternatives that should be included in the discussion paper – historical cost, fair value, and historical cost with use of fair value when certain conditions are met.
AcSB Decision Summary – March 20-21, 2012
The AcSB approved a project plan to develop a standard on agriculture for private enterprises, after considering a high-level overview of the staff’s research into the needs of stakeholders.
This project will include publication of a discussion paper. This paper will likely include a comprehensive overview of the issues, possible approaches in addressing the issues and an invitation to comment. It may also include the AcSB’s preliminary views on the issues discussed. The staff expects the discussion paper to be ready for publication late in 2012
Private Enterprise Advisory Committee Notes – March 22, 2012
The Committee noted the recent AcSB decision to approve a project plan and that a discussion paper should be part of the due process for development of a standard on this topic. The Committee discussed the possible form and content of the discussion paper.
Private Enterprise Advisory Committee Notes – February 3, 2012
The Committee reviewed the results of research in respect of stakeholder needs and financial reporting issues in the agriculture sector. The Committee reaffirmed its recommendation to develop a standard in respect of agriculture, agreed upon a recommended working scope for the standard, and discussed issues to be addressed in the course of the project. Further discussions will be held on this topic at a future meeting.
Disclaimer: This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.