General COMMENTS:
1.
The ED can be either scrapped or postponed to future date as this is clearly a theoretical exercise. Cannot be used by any body.
2.
Under the Indian constitution , Agriculture taxation is a State subject.
Coffee is assessed to 70% under the Agriculturalincometa tax and the balance is subject to
Central Incometax
In respect of tea , 60 % of revenue is assessed to Agricultural incometax and the balance under central Income tax
Thus the new accounting Standard will not be useful to any Authority
3.
Many State Laws prohibit holding of Agricultural lands by Companies (For instance , under sec
79B of the Karnataka Land Holdings Act , no company can own agricultural land .
Under sec 104 of the said Act , this restriction is not applicable to plantation companies . ) in other words agriculture per se is an activity engaged by unorganized , farmers who do not want to consolidate their activities like the westerners. Only a farmer can hold the land and not every body who is unconnected with agricultural operations can hold it.
4.
To ascribe a fair value for Biological assets like sheep , pigs (living ) as well as Agricultural produce at the point of harvest is a highly academic exercise, not relevant ;normally there is no work in progresss valuation in any plantation companies.
5.
ED contains errors – need to be corrected ; properly para- phrased too. For instance though initially the ED talks about both `biological assets ‘as well as agricultural produce , suddenly from para 41to the end (para57) only talks about biological assets and how they should be reflected in the accounts . If this is the real purpose of the Standard ( though in para3 it is stated that the standard has to be applied to agricultural produce )then one should analyse and identify the target – whether the end -users are interested in knowing only the value of biological assets and deal with them, as per their reflection in the accounts . This will not happen in real life !
6.
First one should see whether the biological assets are tradable before prescribing accounting
Standard. In reality itdoes not happen
7.
Standard is silent on hatcheries , prawn , roses and floriculture ,bloodstock breeding (Stud farms
) , orchards, etc. In the case of mangoes , both mango fruits as well as mango pulps are exported. These are the examples relevant in the indianContext .
8.
Ultimately , one should be clear – it is the agricultural produce that has a value and not the growing corps before harvest . To reflect growing corps in the middle of their life cycle is an accounting that will lead to nowhere.
9.
Some unique accounting examplesfrom Indian listed plantation companies :

Expenditure on new planting including upkeep and maintenance expenses on immature plants are capitalised under` development of property ‘. Expenditure incurred for replanting is charged to P&L account in the year of incurrence.

Expenditure incurred on nursery is booked as prepaid in the year of incurrence and charged to expense account in the year of incurrence.

In the case of areca and pepper ,valuation is made at estate cost and in all other cases ,it is valued at cost or market price or average realized price whichever is lower.

Coffee is valued at the estimated realizable value.


In the case of a floriculture company: Expenditure on new flower planting is capitalised under Flower plants under cultivation.valuation of stock of flowers : roses at net realizable value ;gladioli corns at purchase cost; gladioli cormals ,at estimated cost.

In the case of a TEA company : inventories are valued at cost or net realisable value whichever is lower. Cost is determined on weighted average /FIFO method for all categories of inventories other than for auction bought teas in which case cost is considered as actual cost for each line. Cost comprises of expenditure incurred in the normal course of business in bringing such inventories to its present location and includes where applicable, appropriate overheads based on the normal level of activity.
Related coffee/Tea Board subsidies are accrued as other income on obtaining approval from tea/Coffee Board.
10 Para27 of ED – A gain may arise on initial recognition of a biological asset ,such as when a calf is born is a great example of intricate accounting , not indulged in the Indian context so
far .
SRAMANUJAM
COMMENTS ON IND AS 41 –Agriculture
Para number of the
ED
Para10,para11, para12,13
Biological asset Recognition
&measuremen t
Sheep, cattle
,pigs , -living assets
In practice , no entity
(including corporates-
Tea Estates ,
Coffee Estates
) recognises ;
Para10 cannot be applied as the criteria of recognition fails ;Highly theoretical approach ,that too mandated
–word used is
“shall”; fair value of sheep
Agricultur e
Produce
Wool, sugar cane
, milk , harvested cotton
Recognition
&measuremen t
Generally recognition and measurement possible at the point of harvest ;
However many governments subsidise the price of milk, sugar cane and so on
.(agricultural produce – procurement price )
Remarks
My view:
Recognition and measurement of biological asset is not practicable and may end in a highly theoretical exercise .Data
Not useful to any body ;
In the case of agricultural produce , they get their fair value

,pigs, cattle have no basis and cannot be evaluated
/identified.
Trees in a timber plantation , cotton plants
,sugar cane , grape vines
,fruit trees
Again , plants have a varied life cycles,- no one values a crop while it is growing – it may have a value only due to the crop which is harvested ; in other words it is impossible to recognise as an asset at a fair value –fair value to be
For example
Costs of sugar cane farming is easy to disclose and all sugar companies show this cost separately (
The expenditure is not allowed to be deducted from
Incometax computation under the determinatio n , only when the harvest takes place .
The fair value varies upon festive seasons and mainly depends on the yield which is graded by experts
….again one cannot determine the fair value at the time of harvest –like potatos, tomatos , oranges
,apples , onions ..price will vary from month to month and also operate between two extremes .

Para24
Para25
Cost =fair value is ok ascribed for half grown plants is a pure academic exercise in futility.
Biological assets are often attached to land
Correction required :
Some nonliving biological assets ……….. central Income tax .) irrigation issues or new plant pests attacking the seeds from growing etc.
This again takes back to the basic question : whether biological assets per se have a value ? is it necessary to value independentl y without referring to the fair value of the
Though the statement is correct , there cannot be value reflectedat every reporting period particularly when the costs incurred atthat period is negligible
,and there is a delayed yields of the agricultural produce due to delayed monsoon ,

Para26&27
Para30 to 33
Gain or losson initial recognition
……..
Inability to measure fair value reliably
…
Here one should look at the activity carried on by the farmer : is he going to sell biological assets like sheep or cotton plants or tea bushes ? veryvery unlikely
….hence any recognition of loss or profit and crediting the p&l when a calf is born is highly theoretical exercise .
Here this depends on the activity carried out by the farmer ;
Para30 talks of measuring biological asset less any accumulated depreciation
/impairment loss .
In living biological assets or even in plants ,what is the accumulated
Para 28
&29
Gains or lossarising on initial recognition….. agricultural produce at the point of harvest
?highly academic exercise
One can comprehend this to some extent as the produce can be valued easily and costs are accounted ;
My view: agricultural produce is measurable but not biological asset.

Para34 to 38 -
Para 40 to 48
Government grants – two types are seen
:
Grants towards capital and grants towards revenue ;
Examples
From alisted company balance sheet
– all taken to
Reserves and surplus :
Replanting
subsidy:
(subsidy received from cardamom
Board )
Subsidy received from
Tea Board ;
Tea rejuvenation subsidy
Housing
Subsidy
Para43&para4
4 ,para45,for the first time talks of 2 categories of biological
If this is the requirement, then these terms should have been brought under depreciation that one would have incurred is difficult to fathom…One should have great imaginationto understand this.
Crediting of profit and loss account from the government grant is never experienced normally. The conditions stipulated at that time of grant, do not permit the recognition in
P&L account.
Highly theoretical
Mere theoretical exercise ; not relevant even for big plantation

Para50 to 56 assets – consumable biological asset and bearer biological asset
,to be further divided into immature and mature assets
Para46 – activities involving each group of biological asset
–para(a) and para (b) -non financial measures
/estimates – all are irrelevant data
Reconciliation
…. is harvested reaches immediately the factory
,which again depends on the crushing capacity of the factory
….(sugar factories normally work between 120 to 160 days only )
Opening and closing biological asset
–reminds of quantitative definition – under para5
How many fruit trees or how many acreage of sugar cane is a data not germane ;
Most of the sugar cane is supplied by the farmers attached to a particular nearby sugar factory So that the cane which companies – please look at certain planatation company balance sheets
All living biological assets should wear ID badges

Mistakes noticed in the ED :
(1) Para25
Somenon living biological assets are attached to the earth
….
(2) Para33- ….an entity considers the
applicability of Ind AS2
(3) Para43 ,44,
45 should come in para5 as they define a new classification of biological assets.
(4) Annexure – amendments to other standards :
IndAS 23 ; Borrowing costs
Definitions
7 (f) Instead of bearer plants –use
Bearer Agricultural plants as per AS 41 .
(to avoid confusion with Tangible plant and machinery ) particulars ….. probably in future !