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Agriculture

Ind AS - 041 - B. Indian Accounting Standards (Ind AS) - Companies Law - Ind AS - 041 - Indian Accounting Standard (Ind AS) 41 (The Indian Accounting Standard includes paragraphs set in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles. Objective The objective of this Standard is to prescribe the accounting treatment and disclosures related to agricultural activity. Scope 1 This Standard shall be applied to account for the following when t .....

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arer plants (see Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance). (d) intangible assets related to agricultural activity (See Ind AS 38 Intangible Assets). 3 This Standard is applied to agricultural produce, which is the harvested produce of the entity s biological assets, at the point of harvest. Thereafter, Ind AS 2 Inventories or another applicable Standard is applied. Accordingly, this Standard does not deal with the processing of agricultural produce afte .....

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rvest: Biological assets Agricultural produce Products that are the result of processing after harvest Sheep Wool Yarn, carpet Trees in a timber plantation Felled Trees Logs, lumber Dairy Cattle Milk Cheese Pigs Carcass Sausages, cured hams Cotton plants Harvested cotton Thread, clothing Sugarcane Harvested cane Sugar Tobacco plants Picked leaves Cured tobacco Tea bushes Picked leaves Tea Grape vines Picked grapes Wine Fruit trees Picked fruit Processed fruit Oil palms Picked fruit Palm oil Rubb .....

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entity of the biological transformation and harvest of biological assets for sale or for conversion into agricultural produce or into additional biological assets. Agricultural produce is the harvested product of the entity s biological assets. A bearer plant is a living plant that: (a) is used in the production or supply of agricultural produce; (b) is expected to bear produce for more than one period; and (c) has a remote likelihood of being sold as agricultural produce, except for incidental .....

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ogical asset or the cessation of a biological asset s life processes. 5A The following are not bearer plants: (a) plants cultivated to be harvested as agricultural produce (for example, trees grown for use as lumber); (b) plants cultivated to produce agricultural produce when there is more than a remote likelihood that the entity will also harvest and sell the plant as agricultural produce, other than as incidental scrap sales (for example, trees that are cultivated both for their fruit and thei .....

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ivating orchards and plantations, floriculture and aquaculture (including fish farming). Certain common features exist within this diversity: (a) Capability to change Living animals and plants are capable of biological transformation; (b) Management of change Management facilitates biological transformation by enhancing, or at least stabilising, conditions necessary for the process to take place (for example, nutrient levels, moisture, temperature, fertility, and light). Such management distingu .....

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as a routine management function. 7 Biological transformation results in the following types of outcomes: (a) asset changes through (i) growth (an increase in quantity or improvement in quality of an animal or plant), (ii) degeneration (a decrease in the quantity or deterioration in quality of an animal or plant), or (iii) procreation (creation of additional living animals or plants); or (b) production of agricultural produce such as latex, tea leaf, wool, and milk. General definitions 8 The fo .....

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ogical asset or agricultural produce when, and only when: (a) the entity controls the asset as a result of past events; (b) it is probable that future economic benefits associated with the asset will flow to the entity; and (c) the fair value or cost of the asset can be measured reliably. 11 In agricultural activity, control may be evidenced by, for example, legal ownership of cattle and the branding or otherwise marking of the cattle on acquisition, birth, or weaning. The future benefits are no .....

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pplying Ind AS 2 Inventories or another applicable Standard. 14 [ Refer Appendix 1] 15 The fair value measurement of a biological asset or agricultural produce may be facilitated by grouping biological assets or agricultural produce according to significant attributes; for example, by age or quality. An entity selects the attributes corresponding to the attributes used in the market as a basis for pricing. 16 Entities often enter into contracts to sell their biological assets or agricultural pro .....

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visions, Contingent Liabilities and Contingent Assets. Ind AS 37 applies to onerous contracts. 17-21 [ Refer Appendix 1] 22 An entity does not include any cash flows for financing the assets, taxation, or reestablishing biological assets after harvest (for example, the cost of replanting trees in a plantation forest after harvest). 23 [ Refer Appendix 1] 24 Cost may sometimes approximate fair value, particularly when: (a) little biological transformation has taken place since initial cost incurr .....

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market may exist for the combined assets, that is, the biological assets, raw land, and land improvements, as a package. An entity may use information regarding the combined assets to measure the fair value of the biological assets. For example, the fair value of raw land and land improvements may be deducted from the fair value of the combined assets to arrive at the fair value of biological assets. Gains and losses 26 A gain or loss arising on initial recognition of a biological asset at fair .....

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ce at fair value less costs to sell shall be included in profit or loss for the period in which it arises. 29 A gain or loss may arise on initial recognition of agricultural produce as a result of harvesting. Inability to measure fair value reliably 30 There is a presumption that fair value can be measured reliably for a biological asset. However, that presumption can be rebutted only on initial recognition for a biological asset for which quoted market prices are not available and for which alt .....

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as held for sale) in accordance with Ind AS 105 Noncurrent Assets Held for Sale and Discontinued Operations, it is presumed that fair value can be measured reliably. 31 The presumption in paragraph 30 can be rebutted only on initial recognition. An entity that has previously measured a biological asset at its fair value less costs to sell continues to measure the biological asset at its fair value less costs to sell until disposal. 32 In all cases, an entity measures agricultural produce at the .....

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n profit or loss when, and only when, the government grant becomes receivable. 35 If a government grant related to a biological asset measured at its fair value less costs to sell is conditional, including when a government grant requires an entity not to engage in specified agricultural activity, an entity shall recognise the government grant in profit or loss when, and only when, the conditions attaching to the government grant are met. 36 Terms and conditions of government grants vary. For ex .....

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asset measured at its cost less any accumulated depreciation and any accumulated Impairment losses (see paragraph 30), Ind AS 20 is applied. 38 This Standard requires a different treatment from Ind AS 20, if a government grant relates to a biological asset measured at its fair value less costs to sell or a government grant requires an entity not to engage in specified agricultural activity. Ind AS 20 is applied only to a government grant related to a biological asset measured at its cost less a .....

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antified description. 43 An entity is encouraged to provide a quantified description of each group of biological assets, distinguishing between consumable and bearer biological assets or between mature and immature biological assets, as appropriate. For example, an entity may disclose the carrying amounts of consumable biological assets and bearer biological assets by group. An entity may further divide those carrying amounts between mature and immature assets. These distinctions provide informa .....

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ets are those other than consumable biological assets; for example, livestock from which milk is produced and fruit trees from which fruit is harvested,. Bearer biological assets are not agricultural produce but, rather, are held to bear produce. 45 Biological assets may be classified either as mature biological assets or immature biological assets. Mature biological assets are those that have attained harvestable specifications (for consumable biological assets) or are able to sustain regular h .....

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existence and carrying amounts of biological assets whose title is restricted, and the carrying amounts of biological assets pledged as security for liabilities; (b) the amount of commitments for the development or acquisition of biological assets; and (c) financial risk management strategies related to agricultural activity. 50 An entity shall present a reconciliation of changes in the carrying amount of biological assets between the beginning and the end of the current period. The reconciliati .....

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tion currency, and on the translation of a foreign operation into the presentation currency of the reporting entity; and (g) other changes. 51 The fair value less costs to sell of a biological asset can change due to both physical changes and price changes in the market. Separate disclosure of physical and price changes is useful in appraising current period performance and future prospects, particularly when there is a production cycle of more than one year. In such cases, an entity is encourag .....

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f those physical changes has a direct relationship to future economic benefits. A change in fair value of a biological asset due to harvesting is also a physical change. 53 Agricultural activity is often exposed to climatic, disease and other natural risks. If an event occurs that gives rise to a material item of income or expense, the nature and amount of that item are disclosed in accordance with Ind AS 1 Presentation of Financial Statements. Examples of such an event include an outbreak of a .....

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iably; (c) if possible, the range of estimates within which fair value is highly likely to lie; (d) the depreciation method used; (e) the useful lives or the depreciation rates used; and (f) the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period. 55 If, during the current period, an entity measures biological assets at their cost less any accumulated depreciation and any accumulated impairment losses (see .....

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