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IAS 41

Agriculture

IAS 41 prescribes the accounting for agricultural activity, requiring biological assets to be measured at fair value less costs to sell (both on initial recognition and at each subsequent reporting date) with changes recognised in profit or loss, reflecting the view that fair value better represents the economics of biological transformation than historical cost. [S1]

Effective 2003-01-01Related: IAS 16 · IAS 2 · IAS 20 · IFRS 13

Overview

Agricultural activity is the management by an entity of the biological transformation and harvest of biological assets for sale, or for conversion into agricultural produce or additional biological assets. [S1] A biological asset (a living animal or plant) is measured at fair value less costs to sell at initial recognition and at each subsequent reporting date, with the resulting gain or loss recognised in profit or loss in the period it arises; agricultural produce (the harvested product of a biological asset) is measured at fair value less costs to sell at the point of harvest, which then becomes its cost for subsequent accounting under IAS 2 or another applicable Standard. [S2] Bearer plants (living plants used solely to grow produce over multiple periods, such as fruit trees, that are not themselves sold as a biological asset or harvested as produce) are excluded from IAS 41 and instead accounted for as property, plant and equipment under IAS 16, though the produce growing on them remains within IAS 41's scope until harvest.

Why it matters

Fair value accounting for living, growing assets is one of the more unusual measurement models in IFRS, and it directly captures the economics of Nigeria's large agricultural sector — crop farming, livestock, poultry, aquaculture and plantation crops — in a way historical cost cannot: biological transformation (growth, fattening, ripening) genuinely changes an asset's value even before it is sold. But this also means agricultural entities report fair value gains and losses through profit or loss that are unrealised and not backed by cash, driven by sometimes-illiquid or thinly evidenced markets for growing crops or livestock, which requires careful, defensible valuation work rather than approximation.

Scope

Applies to biological assets (except bearer plants), agricultural produce at the point of harvest, and government grants related to biological assets measured at fair value less costs to sell, when the agricultural activity relates to the management of biological transformation and harvest. It does not apply to land related to agricultural activity (IAS 16 or IAS 40), bearer plants (IAS 16, though produce growing on them remains within IAS 41), intangible assets related to agricultural activity (IAS 38), or, generally, government grants related to bearer plants (IAS 20).

Key definitions

term
Agricultural activity
definition
The management by an entity of the biological transformation and harvest of biological assets for sale, or for conversion into agricultural produce or into additional biological assets.
term
Biological asset
definition
A living animal or plant.
term
Agricultural produce
definition
The harvested product of the entity's biological assets.
term
Biological transformation
definition
The processes of growth, degeneration, production and procreation that cause qualitative or quantitative changes in a biological asset.
term
Bearer plant
definition
A living plant used solely to grow produce over more than one period, with a remote likelihood of being sold as a biological asset (except for incidental scrap sales), and not expected to be harvested as agricultural produce itself; accounted for under IAS 16, not IAS 41.
term
Costs to sell
definition
The incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxes.

Recognition

A biological asset or agricultural produce is recognised only when the entity controls the asset as a result of past events, it is probable that future economic benefits associated with the asset will flow to the entity, and the fair value or cost of the asset can be measured reliably. Agricultural produce is recognised, and measured at fair value less costs to sell at the point of harvest, at which point it transitions out of IAS 41 and into the scope of IAS 2 (or another applicable Standard) for its subsequent accounting as inventory.

Initial measurement

A biological asset is measured at initial recognition at its fair value less costs to sell, except in the rare cases where fair value cannot be measured reliably on initial recognition (for a biological asset with no active market and for which alternative fair value estimates are determined to be clearly unreliable), in which case it is measured at cost less any accumulated depreciation and impairment losses until fair value becomes reliably measurable. Agricultural produce is measured at fair value less costs to sell at the point of harvest, which is always considered reliably measurable at that point.

Subsequent measurement

A biological asset continues to be measured at fair value less costs to sell at each subsequent reporting date, with gains or losses arising from initial recognition and from changes in fair value less costs to sell recognised in profit or loss for the period in which they arise; once agricultural produce is measured at fair value less costs to sell at the point of harvest, that amount becomes its cost for subsequent measurement under IAS 2 or another applicable Standard, and it is not subsequently remeasured under IAS 41 again.

Presentation

Biological assets are presented as a separate line item (or clearly identified) in the statement of financial position, distinguishing consumable biological assets (to be harvested as agricultural produce or sold as biological assets, such as livestock for slaughter or annual crops) from bearer biological assets (which are self-regenerating, such as breeding livestock), and mature from immature biological assets where relevant to understanding the entity's operations. Gains and losses on initial recognition and remeasurement are presented within profit or loss, typically disclosed separately given their unrealised and often significant nature.

Disclosure checklist

  • The aggregate gain or loss arising during the period on initial recognition of biological assets and agricultural produce, and from the change in fair value less costs to sell of biological assets.
  • A description of each group of biological assets, distinguishing consumable from bearer biological assets, and mature from immature biological assets, where appropriate.
  • The methods and significant assumptions applied in determining the fair value of each group of agricultural produce at the point of harvest and each group of biological assets.
  • A reconciliation of changes in the carrying amount of biological assets between the beginning and end of the period, showing gains/losses from fair value changes, purchases, sales, harvest, business combinations, and foreign exchange translation differences.
  • Where fair value cannot be reliably measured for a biological asset (measured instead at cost less depreciation and impairment), a description of the biological assets, an explanation of why fair value cannot be reliably measured, and, if possible, a range within which fair value is highly likely to lie.
  • The nature and extent of government grants related to agricultural activity recognised in the financial statements, unfulfilled conditions, and significant decreases expected in the level of government grants.

Practical treatment

The practical discipline is building genuinely defensible fair value estimates for biological assets that often lack a thick, liquid, quoted market, using observable market prices for similar assets (adjusted for age, condition, location and biological stage) or, where no such market exists, a present value of expected net cash flows from the asset discounted at a current market-determined rate, explicitly excluding cash flows for financing, taxation, or future biological transformation not yet undertaken. Distinguishing bearer plants (accounted for under IAS 16, at cost or revalued amount, with depreciation) from the produce they grow (which stays within IAS 41 at fair value until harvest) is a common structural judgement in plantation-style agriculture. See nigeria_notes for the practical challenges of Nigerian agricultural asset valuation and the CBN-backed lending schemes common in this sector.

Common mistakes

  • Measuring biological assets at cost (or cost less depreciation) as a default, rather than fair value less costs to sell, without genuinely establishing that fair value cannot be reliably measured (a narrow, rare exception).
  • Applying IAS 41 fair value measurement to bearer plants themselves, when bearer plants are excluded from IAS 41 and accounted for under IAS 16, with only the produce growing on them remaining within IAS 41.
  • Including financing costs, tax effects, or the cost of achieving future biological transformation not yet undertaken within a discounted cash flow fair value estimate for a biological asset.
  • Failing to remeasure biological assets at each reporting date, treating an initial fair value measurement as a one-off event rather than an ongoing requirement.
  • Continuing to apply IAS 41 fair value measurement to agricultural produce after the point of harvest, when it should transition to IAS 2 (or another applicable Standard) at that point.

CFO checklist

  • Confirm biological assets are measured at fair value less costs to sell by default, reserving the cost-less-depreciation exception for the narrow cases where fair value is genuinely unreliable.
  • Distinguish bearer plants (IAS 16) from other biological assets and from the produce growing on bearer plants (which stays in IAS 41 until harvest).
  • Build and document a defensible fair value methodology for each group of biological assets, using observable market evidence where available and a properly constructed discounted cash flow model otherwise.
  • Remeasure biological assets at every reporting date, not just at initial recognition.
  • Ensure agricultural produce transitions correctly from IAS 41 fair value measurement to IAS 2 cost-basis measurement at the point of harvest.
  • Separately identify and account for the government grant benefit of any concessional agricultural financing scheme, distinct from the biological asset's own fair value measurement.

FAQs

q
We have a herd of cattle for beef production — do we measure them at cost or fair value?
a
Fair value less costs to sell, both on initial recognition and at each subsequent reporting date, with changes recognised in profit or loss; cost-based measurement is only permitted in the rare circumstance that fair value genuinely cannot be reliably measured, which is not typically the case for livestock with an active local market.
q
Do we measure our oil palm trees at fair value under IAS 41?
a
No. Oil palm trees used solely to grow produce over multiple periods are bearer plants, accounted for under IAS 16 at cost (or revalued amount) less accumulated depreciation, like other property, plant and equipment; only the palm fruit produce growing on the trees is measured at fair value less costs to sell under IAS 41, up to the point of harvest.
q
We harvested our maize crop and it's now sitting in storage awaiting sale — do we keep remeasuring it at fair value?
a
No. Once harvested, agricultural produce is measured at fair value less costs to sell only at the point of harvest; that amount becomes its cost for subsequent measurement as inventory under IAS 2, which is then measured at the lower of cost and net realisable value, not remeasured to fair value again under IAS 41.

Nigeria application notes

Regulatory overlay

IAS 41 applies in full to Nigerian public interest entities engaged in agricultural activity under the FRCN Act 2011 mandate. [S3] Nigerian agriculture (crop farming, livestock, poultry, aquaculture and plantation crops) is a major economic sector supported by targeted Central Bank of Nigeria interventions, most notably the Anchor Borrowers' Programme, which provides concessional in-kind and cash financing to smallholder farmers linked to anchor processing companies, administered through participating financial institutions under CBN developmental powers. [S4]

Tax interaction (Nigeria)

Gains and losses on biological assets recognised under IAS 41 are unrealised accounting measurements and are not automatically the same as taxable income under the Nigeria Tax Act 2025; agricultural businesses should confirm with current NRS practice whether, and when, unrealised fair value gains on biological assets are subject to companies income tax (at the standard illustrative 30% rate, or the small-company rate subject to qualifying conditions), since tax rules in many jurisdictions tax agricultural income only on realisation (sale) rather than on the accounting fair value movement itself. [S5][S_TAX1][S_TAX2] Nigerian rates, thresholds, exemptions, incentives and filing rules referenced in this file (including CIT, VAT, withholding tax categories, government incentive schemes, and the small-company threshold) should be independently verified against the Nigeria Tax Act 2025, the Nigeria Tax Administration Act 2025, NIPC/NUPRC/CBN guidance, and current NRS practice at the reporting or filing date, since thresholds, rates and reliefs are subject to periodic revision and to sector- or entity-specific qualifying conditions. This file does not constitute legal or tax advice. [S_TAX1][S_TAX2]

FX considerations

Nigerian agricultural inputs (fertiliser, agrochemicals, machinery, certain feed components) are frequently imported and priced in foreign currency, so naira volatility directly affects the cost side of agricultural operations even though biological assets themselves are measured at fair value in naira based on local market prices; where fair value is estimated using a discounted cash flow approach referencing export-parity or foreign-currency-linked commodity prices (relevant for export crops), the naira fair value should reflect a defensible, disclosed translation basis, such as the CBN NFEM rate. [S6]

SME practical note

Nigerian SME and smallholder-linked agribusinesses financed under CBN intervention schemes such as the Anchor Borrowers' Programme often lack a formal fair valuation process for their livestock or crops, informally carrying them at input cost; Outliers recommends building a simple, documented fair value methodology (using local market prices for comparable livestock or crops at the relevant growth stage, or a straightforward discounted cash flow approach where no direct market comparison exists) as a core deliverable of any IFRS conversion engagement for an agricultural client, since this is one of the most materially different areas from informal cost-based bookkeeping.

Common Nigerian pitfalls

  • Carrying livestock or crops at input cost rather than fair value less costs to sell, without establishing that fair value is genuinely unreliable.
  • Measuring oil palm, cocoa, or rubber trees (bearer plants) at fair value under IAS 41, when they should be accounted for as PPE under IAS 16.
  • Assuming unrealised IAS 41 fair value gains are automatically taxable in the year they are recognised, without confirming current Nigerian tax treatment of unrealised agricultural gains.
  • Failing to separately account for the government grant benefit of CBN-backed concessional agricultural financing, folding it entirely into the biological asset's fair value instead.

FRC pronouncements

No FRCN pronouncement specific to IAS 41 fair value measurement of biological assets has been identified; the relevant Nigerian regulatory context is primarily CBN's sector-specific agricultural financing intervention framework, operating alongside FRCN's general IFRS compliance mandate. [S3][S4]

Worked examples

Initial recognition and remeasurement of a poultry flock

A Nigerian poultry farm acquires 10,000 day-old broiler chicks for ₦15,000,000. At the reporting date, six weeks later, the flock (now nearing maturity for sale) has an estimated fair value of ₦35,000,000, with estimated costs to sell of ₦1,000,000.

Facts

Workings

Fair value less costs to sell at the reporting date: 35,000,000 - 1,000,000 = 34,000,000

Gain on biological asset for the period: 34,000,000 - 15,000,000 = 19,000,000

Journal entries

Recognise the acquisition of the broiler flock (a biological asset) at cost, as a proxy for fair value less costs to sell at the acquisition date.

AccountDr (₦)Cr (₦)
Biological assets – poultry flock15,000,000
Cash15,000,000

Remeasure the poultry flock to fair value less costs to sell at the reporting date, recognising the gain in profit or loss.

AccountDr (₦)Cr (₦)
Biological assets – poultry flock19,000,000
Gain on remeasurement of biological assets (profit or loss)19,000,000

Distinguishing a bearer plant from its produce

A Nigerian plantation company owns mature oil palm trees with a carrying amount (under IAS 16, at cost less accumulated depreciation) of ₦80,000,000. At the reporting date, unripe palm fruit bunches still growing on the trees (not yet harvested) have an estimated fair value less costs to sell of ₦12,000,000.

Facts

Workings

The oil palm trees themselves are bearer plants, accounted for under IAS 16 at cost less accumulated depreciation, and are not remeasured to fair value under IAS 41.

The unharvested palm fruit bunches are agricultural produce still attached to the bearer plant, and are recognised separately at fair value less costs to sell of 12,000,000 under IAS 41, since they will be harvested as produce even though the trees themselves will not be sold.

Journal entries

Recognise the unharvested palm fruit produce at fair value less costs to sell, separately from the bearer plant trees carried under IAS 16.

AccountDr (₦)Cr (₦)
Biological assets – unharvested palm fruit produce12,000,000
Gain on initial recognition of agricultural produce (profit or loss)12,000,000

Sources & citations

  1. [S1]IAS 41 Agriculture — IFRS Foundationaccessed 2026-07-18
  2. [S2]IAS 41 Agriculture — IFRS in Brief — Moore Globalaccessed 2026-07-18
  3. [S3]IFRS - Use of IFRS Standards by jurisdiction: Nigeria — IFRS Foundationaccessed 2026-07-18
  4. [S4]Anchor Borrowers' Programme Guidelines — Central Bank of Nigeriaaccessed 2026-07-18
  5. [S5]The Nigerian Tax Reform Acts — PwC Nigeriaaccessed 2026-07-18
  6. [S6]Exchange Rates (NFEM, official) — Central Bank of Nigeriaaccessed 2026-07-18
  7. [S_TAX1]Nigeria Tax Act, 2025 has been signed – highlights — EY Globalaccessed 2026-07-18
  8. [S_TAX2]Nigeria's 2025 Tax Reform Acts Explained: Key Changes — Baker Tilly Nigeriaaccessed 2026-07-18
Last reviewed 2026-07-18 · Reviewer: Rafiu Olawuyi, FCA (Author / Technical Reviewer)