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Version date: 26 February 2020 - onwards

Support for the use of IAS 16 (paras. BC64-BC67)

BC64 Prior to the 2014 amendments, IAS 41 required all biological assets related to agricultural activity to be measured at fair value less costs to sell, based on the principle that their biological transformation is best reflected by fair value measurement. However, mature bearer plants are fully grown and so, apart from bearing produce, biological transformation is no longer significant in generating future economic benefits. Bearer plants are used solely to grow produce over several periods. After this time they are usually scrapped. Consequently, the only significant future economic benefits from bearer plants arise from selling the agricultural produce that they create.

BC65 The Board noted that while fair value measurement may provide an indication of the quality and productive capacity of the bearer plants at a point in time, it is less important to users of financial statements than it is for biological assets whose value may be realised through sale as agricultural produce.

BC66 Bearer plants meet the definition of property, plant and equipment. The use of mature bearer plants to produce agricultural produce is similar to the use of machinery to manufacture goods. The manner in which an entity derives economic benefits from bearer plants and a production plant is similar and that manner differs from biological assets that are harvested for sale. The progressive decline in the future earning potential of a bearer plant over its life is also similar to other depreciable assets, for example, plant and machinery.