The following table identifies the changes made to this Subtopic.
This Subtopic addresses accounting for equity by entities in the agricultural industry. The guidance for accounting for
agricultural cooperatives is presented in the Cooperatives Subsections.
The Cooperatives Subsections address accounting for equity by cooperatives in the agricultural industry.
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see the
General Subsection of Section 905-10-15.
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.
The composition of the equity section of a cooperative's balance sheet distinguishes it from other balance sheets. Generally, its equities arise from investments by members and nonmembers and from patronage allocations. In addition, cooperatives may accumulate unallocated retained earnings arising from after-tax earnings on nonpatronage business.
If the retained patronage allocations and per-unit retains have no fixed maturity dates and are subordinated to all debt instruments, they shall be treated as equity with appropriate disclosure of face value, dividend rate, negotiability, subordination agreements, and any revolving or retirement plan.
Allocated equities are usually paid, or revolved, over a number of years. The timing may be specified in the cooperative's bylaws, but it is usually at the discretion of its board of directors. The amounts shall not be classified as current liabilities until the board has formally acted to revolve the equities.
Certain transactions of cooperatives may result in unallocated equities. For example, cooperatives may derive earnings from nonpatronage business and account for these earnings as other entities do. Nonpatronage earnings are frequently not allocated and shall be classified as retained earnings in the equity section. In addition, a cooperative may elect at times not to allocate patronage earnings or losses.
In addition to allocated equities, cooperatives may issue common and preferred stock. Common stock is often issued to establish members' voting rights, whereas preferred stock may be sold to members and nonmembers on a nonpatronage basis. Cooperatives may also issue preferred stock as a form of earnings distribution. Limited amounts of dividends on preferred stock are tax deductible by exempt cooperatives, but they are not tax deductible by nonexempt cooperatives.