Background
In November 2019, the AcSB issued Section 3041. The standard was effective for fiscal years beginning on or after January 1, 2022, with earlier application permitted. The Board typically decides whether to conduct a post-implementation review after a two-year period from when a new standard becomes effective based on its Standard-setting Due Process Manual.
The objectives of a post-implementation review are to determine whether the standard is understandable and is being applied as intended, and whether preparers are able to report the information reliably.
Through discussions with its Agriculture Advisory Group (the Group) and questions received from some interested and affected parties, the AcSB has become aware that preparers are encountering operational challenges with providing information required by certain disclosure requirements under the cost and net realizable value models for agricultural inventories. One of these disclosure requirements also applies to inventories accounted for under Section 3031, Inventories. Some interested and affected parties have also raised questions about the accounting for productive biological assets managed on a collective basis, including:
- the scope of this amortization requirement (i.e., whether the requirement not to amortize such collective assets can only be applied to animals); and
- the concept of productive capacity and when the cost of such collective assets can be increased.
The AcSB decided not to conduct a post-implementation review of Section 3041 given the limited issues raised by the Group and other relevant parties, which suggest the standard is generally understandable and is being applied as intended. Instead, the Board commenced this standard-setting project to respond more quickly to the issues identified by interested and affected parties. A post-implementation review is not a standard-setting project.
Accordingly, the AcSB proposes amendments to remove certain disclosure requirements in Section 3041 and clarify the scope of the amortization requirement for productive biological assets managed on a collective basis. In clarifying the amortization requirement in Section 3041, the Board also thought it would help to add guidance on accounting for when there is a change in the useful life of productive biological assets.
The AcSB would also like to take this opportunity to gather input from interested and affected parties to inform whether any additional guidance, being authoritative or non-authoritative, is needed to help with applying Section 3041.