ASC 330-905
Agriculture
330 Inventory
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ASC 330-905 applies Inventory guidance to the agricultural industry, covering producers (growing crops, developing animals, harvested crops, livestock held for sale, secondary products), pooling cooperatives, and cooperative patrons. Direct and indirect costs of growing crops are accumulated until harvest, with pre-planting costs deferred and post-harvest cultural costs estimated and accrued to the harvested crop. Harvested crops and animals held for sale may be carried at net realizable value if they have a reliable, readily determinable market price, insignificant and predictable disposal costs, and immediate availability for delivery; otherwise Subtopic 330-10 measurement applies.
Key points (7)
- All direct and indirect costs of growing crops shall be accumulated until harvest; pre-planting costs such as soil preparation are deferred and allocated to the growing crop, and crops requiring more than one year to mature have costs deferred until harvest (330-905-25-1 through 25-2).
- Post-harvest cultural practices (e.g., clearing residue, special tillage, chopping, or burning to overcome a physical or noxious condition) shall be estimated and accrued as costs of the harvested crop (330-905-25-2; 330-905-30-2).
- Animals held for sale and harvested crops are valued under Subtopic 330-10 or at net realizable value if the product has a reliable, readily determinable, and realizable market price, relatively insignificant and predictable disposal costs, and is available for immediate delivery (330-905-35-3 through 35-4).
- A market basis (quoted market prices less estimated direct costs of disposal) is acceptable where a cost basis is not practicable and the products have immediate marketability at prices the producer cannot influence, unit interchangeability, and insignificant disposal costs—e.g., freshly dressed meats (330-905-30-1).
- Animals with short productive lives, such as poultry flocks, may be classified as inventory; other developing, breeding, and production animals are addressed in Subtopic 905-360 (330-905-25-3 through 25-4).
- For pooling cooperatives, board-assigned amounts approximating estimated market for unprocessed patron products are treated as cost and charged to cost of goods sold; if no such amounts are assigned, inventories are accounted for at net realizable value and cost of goods sold includes no charge for unprocessed products (330-905-25-5, 25-7, 35-5).
- Pooling cooperatives shall not use the cash advance method to account for inventories, and the method used and dollar amounts assigned to members' products shall be disclosed (330-905-25-8; 330-905-50-1).
For students. Agriculture is one of the few industries where GAAP permits carrying inventory above cost at net realizable value, but only when the three conditions in 330-905-35-3(b) are all met—students often assume NRV is freely elective. Also watch the cooperative rules: assigned amounts function as cost, and the cash advance method is prohibited.
growing cropsharvested cropsanimals held for salenet realizable valuepooling cooperativeassigned amounts to patron productsdeferred pre-planting and accrued post-harvest costsmarket basis inventory
Machine-generated study aid for ASC 330-905. Check the source paragraphs below.
330-905-00Status
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330-905-00-1
The following table identifies the changes made to this Subtopic.
330-905-05Overview and Background
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330-905-05-1
This Subtopic addresses inventory accounting for entities in the agricultural industry. The guidance for accounting for different entities in the agricultural industry is presented in the following three Subsections:
- aGeneral
- bCooperatives
- cCooperatives—Patrons.
330-905-05-2
The General Subsections provide guidance for all those entities operating in the agricultural industry as set forth in the General Subsection of Section 905-10-05. Inventories of agricultural producers include growing crops, developing animals to be held for sale, harvested crops, livestock held for sale, and secondary products, such as calves from dairy herds and wool from sheep.
330-905-05-3
Field and row crops with cycles of less than one year that constitute part of inventory are generally classed as annuals. These crops include wheat, barley, milo, corn, soybeans, sugar beets, tobacco, cotton, crops raised for seed, tomatoes, lettuce, beans, cabbages, and melons.
Cooperatives
330-905-05-4
The Cooperatives Subsections provide guidance about the different accounting methods used by pooling cooperatives for patron product deliveries. These methods have been developed to satisfy provisions of their bylaws and contractual arrangements with patrons and to provide equitable methods of settlement from pool period to pool period, as well as among the various classes of patrons. For pooling cooperatives, accounting methods have been developed to allow the use of the single-pool or multiple-pool methods of accounting.
Cooperatives—Patrons
330-905-05-5
The Cooperatives—Patrons Subsections address inventory accounting by patrons of agricultural cooperatives.
330-905-15Scope and Scope Exceptions
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Overall Guidance
330-905-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see the General Subsection of Section 905-10-15.
Cooperatives
330-905-15-2
The Cooperatives Subsections follow the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see the Cooperatives Subsection of Section 905-10-15.
Cooperatives—Patrons
330-905-15-3
The Cooperatives—Patrons Subsections follow the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see the Cooperatives—Patrons Subsection of Section 905-10-15.
330-905-25Recognition
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Growing Crops
330-905-25-1
All direct and indirect costs of growing crops shall be accumulated until the time of harvest. Some crop costs, such as soil preparation, are incurred before planting and shall be deferred and allocated to the growing crop.
330-905-25-2
Other cultural practices, such as clearing the residue of harvested crops, cannot be performed or completed until after harvest, which may be in a succeeding year; those costs shall be estimated, accrued, and allocated to the harvested crop. Some crops require more than one year to mature, and the costs shall be deferred until harvest.
Production Animals
330-905-25-3
Animals with short productive lives, such as poultry, may be classified as inventory. Due to the short productive life of poultry, the cost of flocks may be classified as inventory. The accounting principles for poultry operations are much the same as those for other production animals (see paragraph 905-360-25-4), although the operating cycles are much shorter.
330-905-25-4
For guidance on developing animals and animals held for sale, breeding animals, and production animals, see Subtopic 905-360.
Cooperatives
330-905-25-5
If the boards of directors of agricultural marketing cooperatives operating on a pooling basis with no obligation to pay patrons fixed prices (pooling cooperatives) assign amounts that approximate estimated market to unprocessed products received from patrons, the assigned amounts are cost and shall be charged to cost of goods sold.
330-905-25-6
Pooling cooperatives may use net realizable value for determining pool proceeds, transferring inventory amounts to subsequent pools, or for other purposes (see column B in the table in Example 1 (paragraph 905-330-55-1)).
330-905-25-7
If the boards of directors of pooling cooperatives do not assign amounts that approximate market to unprocessed products received from patrons, the cooperatives shall account for inventories at net realizable value (see column C in the table in Example 1 (paragraph 905-330-55-1)). Because amounts that approximate estimated market are not assigned to products received from patrons, cost of goods sold will not include a charge for unprocessed products under this method.
330-905-25-8
Pooling cooperatives shall not use the cash advance method to account for inventories.
330-905-30Initial Measurement
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330-905-30-1
Exceptional cases exist in which it is not practicable to determine an appropriate cost basis for products. A market basis is acceptable if the products meet all of the following criteria:
- aThey have immediate marketability at quoted market prices that cannot be influenced by the producer.
- bThey have characteristics of unit interchangeability.
- cThey have relatively insignificant costs of disposal.
Harvested Crops
330-905-30-2
Generally, farming procedures undertaken after the current year harvest benefit the crop of the succeeding year. There may be instances, however, in which additional costs such as costs of special tillage, chopping, or burning are required after harvest of a particular crop to overcome a physical or noxious condition. Those costs shall be estimated and accrued as costs of the harvested crop.
Cooperatives
330-905-30-4
Agricultural cooperatives operating on a pooling basis may receive products from their patrons without paying a fixed price to the patrons. A cooperative may assign amounts to products on the basis of current prices paid by other buyers or on amounts established by the cooperative's board of directors, or it may assign no amount.
330-905-35Subsequent Measurement
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Growing Crops
Developing Animals
330-905-35-2
Developing animals to be held for sale shall be measured using the guidance in Subtopic 330-10.
Animals Available and Held for Sale
330-905-35-3
Animals held for sale shall be valued at either of the following:
- aThe amount determined using the measurement guidance in Subtopic 330-10
- bNet realizable value, if all the following conditions exist:
- 1The product has a reliable, readily determinable, and realizable market price.
- 2The product has relatively insignificant and predictable costs of disposal.
- 3The product is available for immediate delivery.
- 1
Harvested Crops
330-905-35-4
Inventories of harvested crops shall be valued using the same criteria as animals held for sale in the preceding paragraph.
Cooperatives
330-905-35-5
The inventories for a pooling cooperative shall be accounted for at either of the following:
- aThe amount determined using the measurement guidance in Subtopic 330-10
- b
330-905-40Derecognition
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Cooperatives—Patrons
330-905-50Disclosure
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Cooperatives
330-905-50-1
The method used and the dollar amounts assigned to members' products shall be disclosed.
330-905-55Implementation Guidance and Illustrations
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Cooperatives
Illustrations
330-905-55-1
This Example illustrates the guidance in paragraphs and 905-330-35-5.
330-905-55-2
In this Example, inventory is measured using first-in, first-out (FIFO) and the following assumptions apply:
-
Sales " $129,630 " Beginning inventory Net realizable value " 31,128 " Lower of cost and net realizable value " 28,380 " Assigned value of patrons' raw product received " 56,500 " Ending inventory Net realizable value " 35,596 " Lower of cost and net realizable value " 32,360 " Income taxes " 1,250 " Other costs and expenses " 56,580 " "Amounts paid to patrons, retains, and nonpatronage earnings" " 74,430 " Amounts due patrons at beginning of year Lower of cost and net realizable value method " 8,910 " Net realizable value method " 11,748 "
330-905-55-3
The following tables illustrate the statement of net earnings prepared under each of two possible methods of accounting for inventories (columns A and B), the statement of net proceeds prepared under the net realizable value method (column C), and the respective statements of amounts due patrons, if such latter statement is included in the financial statements. Column A demonstrates the lower of cost and net realizable value method with patrons' raw product being charged to cost of production at assigned amounts. Column B demonstrates the net realizable value method with patrons' raw product being charged to cost of production at assigned amounts. Column C demonstrates the net realizable value method when no amounts are assigned to patrons' raw product; therefore, there is no charge to cost of production for patrons' raw product.
-
Inventories Valued At Lower of Cost and Net Realizable Value (Column A) "Net Realizable Value (Column B)" "Net Realizable Value (Column C)" Sales " $129,630 " " $129,630 " " $129,630 " Costs and expenses (I) " 109,100 " " 108,702 " " 52,202 " Earnings before income taxes " 20,530 " " 20,928 " - Proceeds before income taxes - - " 77,428 " Income taxes " 1,250 " " 1,250 " " 1,250 " Net earnings " $19,280 " " $19,678 " Net proceeds " $76,178 " I. Beginning inventory " $28,380 " " $31,218 " " $31,218 " Assigned value of patrons' raw product received " 56,500 " " 56,500 " - Ending inventory " (32,360)" " (35,596)" " (35,596)" Other costs and expenses " 56,580 " " 56,580 " " 56,580 " " $109,100 " " $108,702 " " $52,202 " -
Statement of Amounts Due Patrons Inventories Valued At Lower of Cost and Net Realizable Value (Column A) Net Realizable Value (Column B) Net Realizable Value (Column C) Amounts due patrons at beginning of year " $8,910 " " $11,748 " " $11,748 " Net earnings " 19,280 " " 19,678 " - Net proceeds - - " 76,178 " Assigned value of patrons' raw product received " 56,500 " " 56,500 " - " 84,690 " " 87,926 " " 87,926 " "Less amounts paid to patrons, retains, and nonpatronage earnings" " 74,430 " " 74,430 " " 74,430 " Amounts due patrons at end of year " $10,260 " " $13,496 " " $13,496 "
330-905-55-4
Under the two inventory methods presented, the difference in amounts due patrons at the end of the year results from the difference in the ending inventory valuations, illustrated as follows.
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Inventories of finished goods and goods in process at: Net realizable value " $35,596 " Lower of cost and net realizable value " (32,360)" " 3,326 " Amounts due patrons at end of year on lower of cost and net realizable value basis " 10,260 " Amounts due patrons at end of year on net realizable value basis " $13,496 "