Accounting Standards for Private Enterprises

Amendments to Section 3041, Agriculture

Summary

In accordance with its Standard-setting Due Process Manual, the Accounting Standards Board (AcSB) typically decides whether to conduct a post-implementation review (PIR) after a two-year period from when a new standard becomes effective. Section 3041, Agriculture, in Part II of the CPA Canada Handbook – Accounting Standards for Private Enterprises was effective for fiscal years beginning on or after January 1, 2022.

The information gathered to date, including discussions with the AcSB’s Agriculture Advisory Group, suggests that the standard is generally understandable and is being applied as intended. Therefore, the Board approved a narrow-scope amendment project to address a few application issues identified instead of conducting a PIR.

Interested and affected parties have informed the AcSB of operational challenges with providing certain disclosures under the net realizable value model. Clarification is also requested on how to determine productive capacity, particularly for productive biological assets managed on a collective basis to improve application in practice.

This project seeks to:

(a) remove the disclosure requirements in paragraphs 3041.88(c) and 3041.88(d) of the net realizable value model; and

(b) develop additional guidance to assist agricultural producers in determining productive capacity for productive biological assets to achieve more consistency in the application of paragraphs 3041.64 and 3041.66.

Staff Contact(s)

Davina Tam, CPA, CA Principal, Accounting Standards Board

+1 416 204 3514

[email protected]

Project Status

Information gathering

The AcSB has gathered information on application issues since Section 3041 became effective on January 1, 2022
Approving project

The AcSB approved the project in September 2024

The AcSB is developing narrow-scope proposals to address the disclosure requirement issues and to provide additional guidance on the concept of productive capacity in Section 3041
Engaging Communities
Deliberating feedback
Final pronouncement

Meeting & event summaries

October 11, 2024

AcSB Decision Summary – September 17-18, 2024

The AcSB discussed feedback from its Agriculture Advisory Group on application issues related to Section 3041, Agriculture, to determine whether there is a need to conduct a post-implementation review. In accordance with its Due Process Manual, the Board typically decides whether a post-implementation review is needed after a two-year period from when a new standard becomes effective.

The Agriculture Advisory Group provided the following feedback:

Many agricultural producers continue to encounter operational challenges with providing the disclosures required by paragraphs 3041.88(c) and 3041.88(d) when agricultural inventories are measured using the net realizable value model. Furthermore, the Group noted that these disclosures do not provide useful information to financial statement users.
Itwould be helpful to clarify how agricultural producers determine productive capacity, particularly for productive biological assets managed on a collective basis, to achieve more consistency in the application of paragraphs 3041.64 and 3041.66.
There have been inquiries on applying the impairment requirements in Section 3063, Impairment of Long-lived Assets, but the industry may be developing experience with applying these requirements to productive biological assets.

The AcSB decided not to conduct a post-implementation review of Section 3041 given the limited issues raised, which suggest that the standard is generally understandable and is being applied as intended. Instead, the Board thought it would be more responsive to interested and affected parties to commence a standard-setting project to address the issues identified, since a post-implementation review is not a standard-setting project. Accordingly, the Board approved a project proposal to address the following narrow-scope application issues:

Remove the disclosure requirements in paragraphs 3041.88(c) and 3041.88(d) for the net realizable value model. The disclosure requirement in paragraph 3041.88(d) also exists in paragraph 3041.86(d) for the cost model, and in paragraph 3031.35(c) of Section 3031, Inventories. Therefore, the AcSB will explore as part of this project whether the same concerns exist with these paragraphs, which would warrant removing them. This would also maintain internal consistency of the complete set of Part II standards.
Clarify the application of paragraphs 3041.64 and 3041.66 through developing additional guidance on how agricultural producers determine productive capacity to help with application in practice.

The AcSB will seek input on the development of the exposure draft proposals from its Agriculture Advisory Group, Private Enterprise Advisory Committee, and Small Practitioners Working Group, and will consider their input at its meeting in December 2024.

The AcSB values input and feedback from interested and affected parties and welcomes them to comment on the Board’s decision through this online form if they think that a post-implementation review should be conducted for Section 3041.

Disclaimer

This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal voting process.