Amendments to PAS 16 and PAS 41 for bearer plants

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The requirement of the existing Philippine Accounting Standards (PAS)* 41 Agriculture, is to measure biological assets and agricultural produce at fair value less cost to sell, except for biological assets where fair value cannot be measured reliably, in which case, should be measured at its cost less any accumulated depreciation and any accumulated impairment losses in accordance with PAS 16 Property, Plant and Equipment and PAS 36 Impairment of Assets.  This is based on the principle that the biological transformation that these assets undergo during their lifespan is best reflected by fair value measurement. 

What Has Changed?

There is a subset of biological assets, known as bearer plants, which are used solely to grow produce over several periods. The amendment defines a bearer plant as “a living plant that:

  • is used in the production or supply of agricultural produce;
  • is expected to bear produce for more than one period; and
  • has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.”

All of the above criteria need to be met for a biological asset to be considered a bearer plant.

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At the end of their productive lives they are usually scrapped. Once a bearer plant is mature, apart from bearing produce, its biological transformation is no longer significant in generating future economic benefits. The only significant future economic benefits it generates come from the agricultural produce that it creates.

The IASB decided that bearer plants should be accounted for in the same way as property, plant and equipment in PAS 16 Property, Plant and Equipment, because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of PAS 16, instead of PAS 41.  Since bearer plants will now be within the scope of PAS 16 and will be subject to all of the requirements therein.  This includes the ability to choose between the cost model and revaluation model for subsequent measurement.

Bearer animals, like bearer plants, may be held solely for the produce that they bear. However, bearer animals have been explicitly excluded from the amendments and will continue to be accounted for under PAS 41 on the basis that the measurement model would become more complex if applied to such assets.

Government grants relating to bearer plants will now be accounted for in accordance with PAS 20 Accounting for Government Grants and Disclosure of Government Assistance, instead of in accordance with PAS 41.

The produce growing on bearer plants will remain within the scope of PAS 41.

Classification (current/noncurrent)

Currently, bearer plants and their agricultural produce are considered to be one asset prior to harvest (i.e. single unit of account) and presented as either current or noncurrent (usually the latter) based on the assets useful life. The amendment now split the plants and the produce into two assets (i.e., two units of account), with different measurement models. Bearer plants will be presented as non-current assets.  Agricultural produce will usually be a current asset, unless it takes more than a year to mature.

Effectivity and Transition

The amendments are required to be applied in starting January 1, 2016 with earlier application permitted.  An entity may apply the amendments on a fully retrospective basis.  Alternatively, an entity may elect to measure a bearer plant at its fair value at the beginning of the earliest period presented.  The fair value would be used as its deemed cost at that date.  Any difference between the previous carrying amount and fair value would be recognized in retained earnings.

The Announcement/Publication

Following is the news published by the IASB in its website on June 30, 2014.

The International Accounting Standards Board (IASB) today published amendments that change the financial reporting for bearer plants, such as grape vines, rubber trees and oil palms.

IAS 41 Agriculture currently requires all biological assets related to agricultural activity to be measured at fair value less costs to sell. This is based on the principle that the biological transformation that these assets undergo during their lifespan is best reflected by fair value measurement. However, there is a subset of biological assets, known as bearer plants, which are used solely to grow produce over several periods. At the end of their productive lives they are usually scrapped. Once a bearer plant is mature, apart from bearing produce, its biological transformation is no longer significant in generating future economic benefits. The only significant future economic benefits it generates come from the agricultural produce that it creates.

The IASB decided that bearer plants should be accounted for in the same way as property, plant and equipment in IAS 16 Property, Plant and Equipment, because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of IAS 16, instead of IAS 41. The produce growing on bearer plants will remain within the scope of IAS 41.

Entities are required to apply the amendments for annual periods beginning on or after 1 January 2016. Earlier application is permitted.

Commenting on the publication of the amendments, Hans Hoogervorst, Chairman of the IASB, said:

“This is an important amendment for those jurisdictions with large agriculture industries. I would like to thank those constituents who helped us to identify this issue through their feedback during the IASB’s agenda consultation and the Malaysian Accounting Standards Board, Asian-Oceanian Standard-Setters Group and Emerging Economies Consultative Group for their valuable input.”

Read on the “IASB issues amendments to IAS 16 and IAS 41 for bearer plants” news released by the IASB by clicking on the link, here. Additional information sources credit to EY.

* PAS, as used herein, stands the same as the International Accounting Standards (IAS) as the former was adopted from the latter and they have, in substance, the same content.


Disclaimer: Opinions expressed in this article are that of the author and information provided are for general conceptual guidance for public information and are not substitute for expert advice. Contact support@philcpa.org for more information and if you want to avail professional services. Find us on Facebook!



Orlando Calundan is a CPA who has exposures in FS audit of entities in various industries such as real estate, food/restaurants, manufacturing, service organizations and BPOs, automotive, holding/investment companies and more. He also has exposure on internal audit engagements.

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