The Bearer Plant
Chapter Eight
Syllabus topic 6, "Key Definitions- Agriculture activity, Bearer Plant and Biological Asset."
Pages 16 to 17 of 110
Read this before anything else in the chapter
MU sets the bearer plant as one of three key definitions of Ind AS 41. That is her syllabus and it is correct that a student must know the definition.
But a bearer plant is not accounted for under Ind AS 41. Paragraph 2(b) puts it outside, in Ind AS 16, Property, Plant and Equipment. Only the produce growing on it is inside, by paragraph 5C.
A candidate who writes "a bearer plant is a biological asset measured at fair value less costs to sell" has it exactly backwards and will lose the whole question. The definition is here so that the reader can tell which plants leave the standard.
The definition
Paragraph 5, in bold:
A bearer plant is a living plant that:
(a) is used in the production or supply of agricultural produce;
(b) is expected to bear produce for more than one period; and
(c) has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.
All three conditions must hold. Test them in order.
(a) Used in production or supply of produce. The plant is a means, not the product.
(b) Bears for more than one period. It survives its own harvest and does it again.
(c) Remote likelihood of being sold as agricultural produce. Nobody grows it to sell the plant itself.
Paragraph 5A: what is NOT a bearer plant
The standard names three exclusions, and each kills a different condition.
(a) plants cultivated to be harvested as agricultural produce (for example, trees grown for use as lumber);
Condition (c) fails. The plant itself is the produce.
(b) plants cultivated to produce agricultural produce when there is more than a remote likelihood that the entity will also harvest and sell the plant as agricultural produce, other than as incidental scrap sales (for example, trees that are cultivated both for their fruit and their lumber); and
Condition (c) fails again, this time on a dual-purpose plant.
(c) annual crops (for example, maize and wheat).
Condition (b) fails. One season, one harvest, then the plant is gone.
Paragraph 5B: the scrap sale that does not spoil it
When bearer plants are no longer used to bear produce they might be cut down and sold as scrap, for example, for use as firewood. Such incidental scrap sales would not prevent the plant from satisfying the definition of a bearer plant.
An old tea bush sold for firewood is still a bearer plant. The word in condition (c) is incidental, and paragraph 5B says so in terms. Contrast it with paragraph 5A(b): a tree deliberately grown for both fruit and lumber is not incidental, and is not a bearer plant.
The Bearer Plant
Paragraph 5C: the sentence that puts the produce back in
One line, and it is the hinge of the whole topic:
Produce growing on bearer plants is a biological asset.
So on a tea estate at 31 March there are two assets in two standards.
| The asset | The standard | Measured at |
|---|---|---|
| The tea bushes | Ind AS 16 | Cost less accumulated depreciation and impairment, or the revaluation model |
| The tea leaves growing on those bushes | Ind AS 41 | Fair value less costs to sell |
Ind AS 41 measures the leaf, not the bush.
The test applied
| Plant | Bearer plant? | Which condition decides |
|---|---|---|
| Tea bush | Yes | All three hold |
| Grape vine | Yes | All three hold |
| Oil palm | Yes | All three hold |
| Rubber tree | Yes | All three hold |
| Apple tree in an orchard | Yes | All three hold |
| Wheat | No | (b), an annual crop, paragraph 5A(c) |
| Maize | No | (b), an annual crop, paragraph 5A(c) |
| Sugarcane | No | The cane is harvested as produce, paragraph 5A(a) |
| Trees in a timber plantation | No | (c), the tree IS the produce, paragraph 5A(a) |
| Trees grown for both fruit and lumber | No | (c), more than a remote likelihood of sale as produce, paragraph 5A(b) |
| A tea bush sold for firewood at the end of its life | Yes, still | An incidental scrap sale, paragraph 5B |
| Nursery saplings raised for sale | No | The plant itself is what is sold |
Why the standard was amended to say all this
Before 2016 a bearer plant was measured at fair value less costs to sell like any other biological asset, which meant a tea estate revalued its bushes at every reporting date and put the movement through profit or loss. A mature bearer plant behaves like a machine: it is used for years to produce something else, and it is not for sale. The amendment moved it to Ind AS 16 so that it is depreciated like the machine it resembles, and paragraphs 2(b), 2(c), 5A, 5B and 5C were inserted to make the split work.
That is also why the exclusion in paragraph 2(c) exists. A grant to plant tea bushes is a grant related to a bearer plant, so it follows the bearer plant to Ind AS 20 rather than staying with Ind AS 41.
The sentence to remember
The bush is Ind AS 16. The leaf is Ind AS 41. The tea in the packet is Ind AS 2.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.