Definition of Agricultural Activity based on IAS 41

IAS 41 Agriculture governs the accounting treatment, financial statement presentation and disclosures related to AGRICULTURE ACTIVITY.

IAS 41 defines Agriculture Activity as the management by an entity of the BIOLOGICAL TRANSFORMATION and harvest of biological assets for sale or for conversion into agricultural produce or into additional biological assets.

Biological Transformation comprises the process of growth, degeneration, production, and procreation that cause qualitative or quantitative changes in a biological asset. A biological asset is a living animal or plant.

Agriculture activity covers a diverse range of activities; for example, raising livestock, forestry, annual or perennial cropping, cultivating orchards and plantations, floriculture and aquaculture (including fish farming)

The above stated agriculture activities have certain common features :

1. Capability to change. Living animals and plants are capable of biological transformation;
2. Management of change. Management facilities 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 distinguishes agricultural activity from other activities. For example, harvesting from unmanaged sources (such as ocean fishing and deforestation) is not agricultural activity; and
3. Measurement of change. The change in quality (for example, genetic merit, density, ripeness, fat cover, protein content, and fibre strength) or quantity (for example, progeny, weight, cubic metres, fibre length or diameter, and number of buds) brought about by biological transformation or harvest is measured and monitored as a routine management function.

Biological transformation results in the following types of outcomes :

1. 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
2. production of agricultural produce such as latex, tea leaf, wool, and milk.

Agriculture activities are distinguished by the fact that management facilitates and manages biological transformation and is capable of measuring the change in the quality and quantity of biological assets (HRD).