Amendments to Section 3041, Agriculture

The AcSB considered feedback from its Agriculture Advisory Group on the proposal to provide guidance on accounting for when there is a change in useful life of productive biological assets. The Board decided to include this proposal, as well as the other proposals that were discussed at its December 12, 2024, meeting, in an exposure draft to amend Section 3041, Agriculture.

The AcSB approved the issuance of the exposure draft, as well as the related communications and outreach activities. The Board plans to issue the exposure draft in March 2025, with a 60-day comment period.

The AcSB discussed proposals to include in an exposure draft for its Amendments to Section 3041, Agriculture, project. In its discussion of the proposals, the Board considered feedback from its Agricultural Advisory Group, Private Enterprise Advisory Committee, and Medium and Small Practitioners Advisory Committee.

Amendments to disclosures of inventories

The AcSB discussed proposals to:

• remove the disclosure requirements in Agriculture, paragraphs 3041.88(c)-.88(d), for the net realizable value model and remove disclosure requirements in paragraph 3041.86(d) for the cost model; and

• remove the corresponding disclosure from Inventories, paragraph 3031.35(c), along with its related guidance and an Illustrative Example.

The AcSB tentatively decided to proceed with the amendments to Section 3041, as well as consequential amendments to Section 1520, Income Statement, in consideration of feedback from the Agricultural Advisory Group. Regarding the proposal to remove the corresponding disclosure from Section 3031, the Board decided to not address this issue within the scope of this project given mixed feedback received from the Board’s advisory committees and concerns about expanding the scope of the project beyond Section 3041.

Clarifications to accounting for productive biological assets

The AcSBdiscussed a proposal to amend paragraph 3041.66 to address issues raised with the paragraph’s scope. The Board tentatively decided to clarify that the paragraph can be applied to any type of productive biological asset by expanding the example in the paragraph to add reference to other biological forms (e.g., plants). 

The AcSB also discussed feedback from the Agricultural Advisory Group regarding the application of paragraphs 3041.64 and 3041.66 for productive biological assets. Specifically, the Board considered whether additional authoritative guidance was needed on how agricultural producers determine productive capacity, to help with application of this requirement in practice. The Board tentatively decided to not propose changes to the authoritative guidance regarding this topic, instead noting this is an area where agricultural producers will need to apply judgment. The Board tentatively decided to use the exposure draft to gather more information regarding the accounting for productive biological assets, specifically those managed on a collective basis, and whether additional guidance (authoritative or non-authoritative) would be helpful. 

The AcSB also discussed proposals to add new authoritative guidance to clarify the accounting for changes in the useful life of a productive biological asset, and tentatively decided to clarify these requirements. The proposed clarifications will provide guidance on how to account for when a productive biological asset that is being amortized is subsequently determined to have an indefinite useful life, or viceversa.

Effective date and transition 

The AcSB also discussed the proposed effective date and transition guidance. The Board tentatively decided to propose an effective date of January 1, 2027, with early adoption permitted. 

The AcSB discussed the transition requirements and tentatively decided to require retrospective application of the requirements, except for the proposals regarding changes in the useful life of productive biological assets, which will be applied on a prospective basis. Prospective application is in line with the requirements on changes in accounting estimate in Section 1506, Accounting Changes.

Next steps

The AcSB will be presented with a communications and outreach plan and a revised exposure draft to be balloted at its January 2025 meeting. The Board plans to issue the exposure draft in March 2025 with a 60-day comment period. As discussed at the September 2024 Board meeting, in lieu of conducing a post-implementation review of Section 3041, this exposure draft will be used to seek feedback on whether there are issues not addressed in the exposure draft that the Board should consider when it discusses future priorities.

The Committee discussed the AcSB’s project that will propose narrow-scope amendments to Section 3041, Agriculture. Through this project, the Board will propose to 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 Section 3041 for the cost model and in Section 3031, Inventories. The primary purpose of this discussion was to seek input from the Committee on whether changes should be proposed to the Section 3031 disclosures similar to those being proposed in Section 3041.

The Committee discussed the usefulness of the disclosure requirement in paragraph 3031.35(c) and the effects if this disclosure was removed. The Committee generally did not support removing this disclosure, indicating it was useful information for financial statement users.

The Committee also discussed the proposed changes to the inventory disclosures in Section 3041. The Committee thought that those agricultural inventory disclosure requirements should remain.

The Committee discussed additional proposed changes to Section 3041, including removing the disclosure regarding aggregate gains and losses arising from changes in the carrying value as well as improving the authoritative guidance for agricultural producers to assess a productive biological asset’s productive capacity. The Committee did not have significant feedback on these topics.

The AcSB will consider feedback from its Private Enterprise Advisory Committee and its Agriculture Advisory Group in December 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.