Agricultural assets reporting
Who needs to prepare statutory financial statements?
The agricultural sector, at farm-gate, makes an important contribution to the Australian economy as do the wider agriculture, fisheries and forestry sectors. Some of those businesses within those specific sectors are required to prepare statutory financial statements using accounting standards.
When should profits earned from growing plants and animals be recognised?
The following outlines the effect of the current Australian Accounting Standard Agriculture and its amendments when producing general purpose financial statements for agriculture activities.
When making decisions to invest in livestock or crops, it is important to know how profit is measured and the resulting effect on your statement of assets and liabilities.
Say you have just purchased a vineyard and winery where you intend to grow your own grapes and produce your own wine. The accounting standard Agriculture treats differently the related activities of establishing and maintaining vines, growing grapes and producing wine.
If you had also purchased a dairy farm where you have cows, and where you intend on producing your own dairy products such as milk and butter, the cows are within the scope of the agriculture standard; the products are not. If your vineyard and dairy farm are big enough, you will have to think about producing general purpose financial statements under Australian Accounting Standards. What are the requirements of the accounting standard on agriculture? What is the effect of the accounting standard on those financial statements?
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Contribution: David Hardidge is a member of CPA Australia’s Centre of Excellence for External Reporting and is Executive Director, Financial Accounting Advisory Services at Ernst & Young.
The views expressed in this article are the views of the author, not Ernst & Young. This content provides general information, does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Liability limited by a scheme approved under Professional Standards Legislation.