Agriultural inventory
To: Hu Feng
From:
Date: September 18, 2014
Subject: Explanations of the differences between inventory accounting between IFRS and US GAAP.
Facts:
Tarheel Farm, Inc. (TFI) is a corporation involved in agricultural production and has a June 30 financial year-end. It is not publicly traded, but is required to prepare annual financial statements for its bank. Historically, the bank has required that these statements comply with US GAAP rules. Recently, TFI was purchased by OSI China, a Chinese corporation that uses IFRS to prepare its financial statements. TFI typically produces two products: beef cattle and corn. These products have a life cycle of less than one year. The following information is available as of June 30: TFI had 400 acres of field corn planted. The corn will not be harvested until the fall. The accumulated cost of the corn is $95,000. The estimated selling costs are $4,500. TFI had a herd of cattle, including heifers and steers that have not yet been weaned. TFI does not anticipate keeping any of the heifers for its breeding herd. The accumulated cost of the heifers and steers was $50,000. The expected selling costs were $2,000. The livestock’s local market price for these heifers and steers was $70,000.
Issue:
As a result of the purchase of Tarheel by OSI, some items of inventory were restated to conform to the new IFRS standards. Hu Feng, the CEO of the US Agricultural division of OSI would like to know some explanations of the differences between inventory accounting between IFRS and US GAAP, specifically with regards to the items TFI currently has. Mr. Feng is somewhat familiar with technical accounting but is in no way an expert.
Analysis:
The deduction for Agricultural expense is covered under IAS 41. “An entity shall recognize a biological asset or agricultural produce when, and only when: the entity controls the asset as a result of past events (IAS 41)(10)(a)”. “It is probable that future economic benefits associated
From:
Date: September 18, 2014
Subject: Explanations of the differences between inventory accounting between IFRS and US GAAP.
Facts:
Tarheel Farm, Inc. (TFI) is a corporation involved in agricultural production and has a June 30 financial year-end. It is not publicly traded, but is required to prepare annual financial statements for its bank. Historically, the bank has required that these statements comply with US GAAP rules. Recently, TFI was purchased by OSI China, a Chinese corporation that uses IFRS to prepare its financial statements. TFI typically produces two products: beef cattle and corn. These products have a life cycle of less than one year. The following information is available as of June 30: TFI had 400 acres of field corn planted. The corn will not be harvested until the fall. The accumulated cost of the corn is $95,000. The estimated selling costs are $4,500. TFI had a herd of cattle, including heifers and steers that have not yet been weaned. TFI does not anticipate keeping any of the heifers for its breeding herd. The accumulated cost of the heifers and steers was $50,000. The expected selling costs were $2,000. The livestock’s local market price for these heifers and steers was $70,000.
Issue:
As a result of the purchase of Tarheel by OSI, some items of inventory were restated to conform to the new IFRS standards. Hu Feng, the CEO of the US Agricultural division of OSI would like to know some explanations of the differences between inventory accounting between IFRS and US GAAP, specifically with regards to the items TFI currently has. Mr. Feng is somewhat familiar with technical accounting but is in no way an expert.
Analysis:
The deduction for Agricultural expense is covered under IAS 41. “An entity shall recognize a biological asset or agricultural produce when, and only when: the entity controls the asset as a result of past events (IAS 41)(10)(a)”. “It is probable that future economic benefits associated