Treatment of land for various industries

CFA General
#1

Is there someone familiar with properties, plantation and furniture can shed some light on treatment of land purchases. Eg Capex or land or inventory?

  1. How would a land purchase for property development:

a. to build and sell

b. build and leased out

  1. Land purchased for plantation/farming and harvesting its produce to be sold

  2. Land purchased for plantation and processing before being sold, eg, trees for its wood for furniture

#2

https://shop.ifrs.org/ProductCatalog/Product.aspx?ID=1952

#3

Inventory whereas building is covered by Construction contracts (IFRS)

LTA - Investment property (separated position by IFRS)

Land is PPE whereas agricultural products are treated as Inventory.

Same. Land is PPE whereas cut tree limbs are treated as Inventory.

#4
  1. Land purchased for plantation/farming and harvesting its produce to be sold

Land is PPE whereas agricultural products are treated as Inventory.

I agree with land, but biological assets on the land may be treated as LT assets within the scope of IAS 41 (if they are perennial).

#5

1a - Work In Progress (a.k.a. inventory)

1b - Fixed assets (i.e. capitalize and depreciate the building, but don’t depreciate the land)

  1. Fixed assets (capitalize and do not depreciate)

  2. Fixed assets, but allocate between the cost of the actual land (which is not depreciable) and the cost of the natural resources (which would be capitalized and depleted)

#6

According to IAS 41

LTA

  • Plants that give fruits in this year and during next harvests
  • Cows that can breed calves
  • Cows that can give milk
  • And all other basic herds.

Products (Inventory) are all animals that held to be sold and are not kept for long term benefits. Thus example:

  • calves
  • chickens
  • Apples, Cannabis leafs etc.

Wheras primary products are for example:

  • eggs
  • Milk
  • Apples and the like, etc.

Secondary stage products (if exists in a process then the primary products above are just Work in Progress): Such as, for example,

  • Cheese
  • Yogurt
  • Marmalade and the like, etc.

And this position is covered by IAS 2, not by IAS 41.

It’s strongly recommended to book agricultural products based on fair value, initial and subsequent measure.

#7

BTW, any LTA indented for short term sale (and/or long term economic benefits are not supposed to flow into subject) must be immediately reclassified as a short term asset.

Regarding biological asset, pastures, fields, meadows, forests, primary herds, etc. are LTA while the subject holds such assets for long-term benefits (yielding fruits, breed, milk, eggs., etc.). The fruits of such held land (which is a LTA) and the natural yield of animal breed of primary herd (which is a LTA) are inventories held for short term selling or further processing.

Land must not be depreciated according to IFRS but may be revalued.

Depletion is referred to natural resources exploiting according to IFRS and this is covered by IFRS 6.