Background:
Company is in farming and has certain crops which are harvested on a continuous basis (berries, beans, chilies, peppers etc.).
Most costs are incurred before the first harvest starts but if we then recognize all the COGS at the first harvest there wouldn't be any left for subsequent harvests which might be happening over a period of 3-4 months.
Question:
- In line with IAS 41 what is your recommended treatment of these costs and how and when to recognize them on the profit and loss statement? (especially thinking about the continuous sales and further incurred costs during the 3-4 months period)
For post harvest expenses IAS 41 allows to recognize cost separtely.
I won't give more thoughts on how I would personally do it to hopefully get the most unbiased inputs from the community.
Thanks for your support
Roger
How to realize COGS in agriculture when harvest and sales continues over a longer amount of time
Re: How to realize COGS in agriculture when harvest and sales continues over a longer amount of time
Hi,
Don't you recognise those crops as inventory first and COGS when the sale occurs ? Why would you recognise COGS at the moment of harvest ?
Thanks
Don't you recognise those crops as inventory first and COGS when the sale occurs ? Why would you recognise COGS at the moment of harvest ?
Thanks
Re: How to realize COGS in agriculture when harvest and sales continues over a longer amount of time
Hi Leo, sorry this is my wording fault. I meant to write:
- incurred costs are all accumulated under work in progress
- first harvest: how can we determine the value of the COGS if we know that there is going to be a continuous harvest going forward? We would like to avoid recognizing 100% of the WIP accumulated cost at the first sale and wonder whats the best practice in the agriculture industry?
- incurred costs are all accumulated under work in progress
- first harvest: how can we determine the value of the COGS if we know that there is going to be a continuous harvest going forward? We would like to avoid recognizing 100% of the WIP accumulated cost at the first sale and wonder whats the best practice in the agriculture industry?
Re: How to realize COGS in agriculture when harvest and sales continues over a longer amount of time
don't these expenditures relate to bearer plants that should be recognised as assets under IAS 16 and depreciated?
Re: How to realize COGS in agriculture when harvest and sales continues over a longer amount of time
They might but I wonder more about the part for the harvest: How do I handle my accumulated cost under work in progress for the farm for this specific harvest if I harvest in several batches. I don't want to move 100% of the incurred WIP to inventory (for the first harvest as I know there will be more to come).
I would expect that there are maybe best practices and hopefully someone in this group who has experience with this sort of question?
I would expect that there are maybe best practices and hopefully someone in this group who has experience with this sort of question?
Re: How to realize COGS in agriculture when harvest and sales continues over a longer amount of time
We'll see.
In the meantime: what kind of expenditures are we talking about that relate to several harvests but at the same time don't concern bearer plants?
In the meantime: what kind of expenditures are we talking about that relate to several harvests but at the same time don't concern bearer plants?
Re: How to realize COGS in agriculture when harvest and sales continues over a longer amount of time
And are those batches ready to be sold and do you sell them in between ?
Re: How to realize COGS in agriculture when harvest and sales continues over a longer amount of time
what kind of expenditures are we talking about that relate to several harvests but at the same time don't concern bearer plants?
--> Example: Chili plants which can last for about one to two years max. They would incur maintenance, tilling, labor, manure etc.
And are those batches ready to be sold and do you sell them in between ?
--> As soon as they are harvested they will be brought to the market and sold. Every time a new batch can be harvested it will be sold in a relatively short amount of time.
--> Example: Chili plants which can last for about one to two years max. They would incur maintenance, tilling, labor, manure etc.
And are those batches ready to be sold and do you sell them in between ?
--> As soon as they are harvested they will be brought to the market and sold. Every time a new batch can be harvested it will be sold in a relatively short amount of time.