# ASC 505-905: Equity — Agriculture Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/505/905/) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:39:53.653Z to 2026-09-10T00:40:09.039Z Record version: sha256:4bff908f152057941a05e78ad92d2dc643cde0a140f60c7a429c8f58c59849c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-905: Equity — Agriculture ### Machine-generated study aids ```json { "summary": "This Subtopic governs how entities in the agricultural industry — principally agricultural cooperatives — classify and present equity. Its core rule is that cooperative earnings are split between patronage source earnings (from transactions with or for patrons) and nonpatronage earnings, and that allocated equities such as retained patronage allocations and per-unit retains are presented as equity when they have no fixed maturity date and are subordinated to all debt. Unallocated nonpatronage earnings are classified as retained earnings, and allocated equities become current liabilities only when the board formally acts to revolve them.", "key_points": [ "Cooperative earnings are classified as either patronage source earnings (excess of revenues over costs from transactions for or with patrons) or nonpatronage earnings from investments, nonpatronage rentals, and nonpatronage sales or purchases (505-905-45-1).", "Cooperative equity arises from member and nonmember investments and patronage allocations, and may also include unallocated retained earnings from after-tax nonpatronage earnings (505-905-45-2).", "The two most common forms of allocated patronage equities are retained patronage allocations (e.g., qualified or nonqualified written notices of allocation) and per-unit retains withheld from payments to patrons for raw product deliveries without regard to earnings (505-905-45-3).", "Retained patronage allocations and per-unit retains shall be treated as equity if they have no fixed maturity dates and are subordinated to all debt instruments, with disclosure of face value, dividend rate, negotiability, subordination agreements, and any revolving or retirement plan (505-905-45-4).", "Allocated equities that are revolved over time shall not be classified as current liabilities until the board of directors has formally acted to revolve them (505-905-45-5).", "Nonpatronage earnings that are not allocated shall be classified as retained earnings in the equity section; a cooperative may also elect not to allocate patronage earnings or losses (505-905-45-6).", "Cooperatives may issue common stock (often to establish voting rights) and preferred stock to members and nonmembers or as a form of earnings distribution; preferred dividends are tax deductible in limited amounts by exempt cooperatives but not by nonexempt cooperatives (505-905-45-7)." ], "categories": [ "Presentation", "Debt and equity", "Industry-specific", "Disclosure" ], "audience_level": "intermediate", "student_note": "The exam trap is the equity-versus-liability line: patronage allocations and per-unit retains look like amounts owed to patrons, but they stay in equity unless they have fixed maturities or are not subordinated to all debt — and they become current liabilities only upon formal board action to revolve them.", "related_topics": [ "905-10", "505-10", "480-10", "905-705", "905-310" ], "key_concepts": [ "agricultural cooperative", "patronage source earnings", "nonpatronage earnings", "allocated equities", "retained patronage allocations", "per-unit retains", "revolving of equities", "subordination to debt" ] } ``` Source downloaded (UTC): 2026-09-10T00:39:53.653Z to 2026-09-10T00:39:53.653Z Record version: sha256:72f21efd8158fc9fe11fcdb84b9b277a1914b16e0af90e0b02b4ef14105d34e3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-905-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/505/905/#00-status) SEC content: no ##### [505-905-00-1](https://asc.understandingaccounting.org/asc/505/905/#505-905-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:53.653Z to 2026-09-10T00:39:53.653Z Record version: sha256:37e011ce1b59d736233baef4b443a6752d4155e976e7e862e92958155d2d99b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Agricultural CooperativeAddedAccounting Standards Update No. 2014-0603/14/2014
CooperativesSupersededAccounting Standards Update No. 2014-0603/14/2014
Member of an Agricultural CooperativeAddedAccounting Standards Update No. 2014-0603/14/2014
Nonmember of an Agricultural CooperativeAddedAccounting Standards Update No. 2014-0603/14/2014
PatronsAmendedAccounting Standards Update No. 2014-0603/14/2014
Written Notice of AllocationAddedAccounting Standards Update No. 2014-0603/14/2014
905-505-05-1AmendedAccounting Standards Update No. 2014-0603/14/2014
905-505-05-2AmendedAccounting Standards Update No. 2014-0603/14/2014
905-505-15-2AmendedAccounting Standards Update No. 2014-0603/14/2014
905-505-45-1AmendedAccounting Standards Update No. 2014-0603/14/2014
905-505-45-3AmendedAccounting Standards Update No. 2014-0603/14/2014
Source downloaded (UTC): 2026-09-10T00:39:56.683Z to 2026-09-10T00:39:56.683Z Record version: sha256:0cb6f7af6f43f3281c15b8178dcb043df72d389b05c2204e6c3f08184b2bf6e4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-905-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/505/905/#05-overview-and-background) SEC content: no ##### [505-905-05-1](https://asc.understandingaccounting.org/asc/505/905/#505-905-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:56.683Z to 2026-09-10T00:39:56.683Z Record version: sha256:d380099016ac22ff87e04c245dfe4e70420596d7760ae72a9185e4c910a951d2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses accounting for equity by entities in the agricultural industry. The guidance for accounting for [agricultural cooperatives](https://asc.understandingaccounting.org/glossary/a/#agricultural-cooperative "The Agricultural Marketing Act of 1929 defines a cooperative association as any association in which farmers act together in processing, preparing for market, handling, and/or marketing the farm products of persons so engaged, and also means any association in which farmers act together in purchasing, testing, grading, processing, distributing, and/or furnishing farm supplies and/or farm business services. Provided, however, that such associations are operated for producers or purchasers and conform to one or both of the following requirements: No member of an agricultural cooperative association is allowed more than one vote because of the amount of stock or membership capital he may own therein. The association does not pay dividends on stock or membership capital in excess of 8 percent per year. In addition to meeting either of the requirements in this paragraph, the association shall not deal in farm products, farm supplies, and farm business services with or for nonmembers of an agricultural cooperative in an amount greater in value than the total amount of such business transacted by it with or for members. All business transacted by any cooperative association for or on behalf of the United States or any agency or instrumentality thereof shall be disregarded in determining the volume of member and nonmember business transacted by such association.") is presented in the Cooperatives Subsections. ### Cooperatives ##### [505-905-05-2](https://asc.understandingaccounting.org/asc/505/905/#505-905-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:56.683Z to 2026-09-10T00:39:56.683Z Record version: sha256:874082c8e7fafcd12155da9ff07dea1c26f83f1222bb052f9ec0d7516c3d082f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Cooperatives Subsections address accounting for equity by cooperatives in the agricultural industry. Source downloaded (UTC): 2026-09-10T00:39:59.932Z to 2026-09-10T00:39:59.932Z Record version: sha256:83a4ff8f88328d0098c08ffe112cef11855a63da9473cd5b49e836b02ef93220 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-905-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/505/905/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [505-905-15-1](https://asc.understandingaccounting.org/asc/505/905/#505-905-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:59.932Z to 2026-09-10T00:39:59.932Z Record version: sha256:1aee87064e40a646cb493e5ea8966eb748bfe7644b2ad4a8c4b62b81a59edccc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see the [General Subsection](https://asc.understandingaccounting.org/asc/905/10/#15-scope-and-scope-exceptions) of Section 905-10-15. ### Cooperatives ##### [505-905-15-2](https://asc.understandingaccounting.org/asc/505/905/#505-905-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:39:59.932Z to 2026-09-10T00:39:59.932Z Record version: sha256:92a3e0de0c81cf941f27e37aa6dc399bfd38bc5ecd29e7cbd086b3cc9802af9e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Cooperatives Subsections follow the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see the [Cooperatives Subsection](https://asc.understandingaccounting.org/asc/905/10/#15-scope-and-scope-exceptions) of Section 905-10-15. Source downloaded (UTC): 2026-09-10T00:40:06.141Z to 2026-09-10T00:40:06.141Z Record version: sha256:5a89732c190dc5cbd047b43637afbbeaee30f8911b0bc3413a0e7b07135ca80f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-905-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/505/905/#45-other-presentation-matters) SEC content: no ### Cooperatives ##### [505-905-45-1](https://asc.understandingaccounting.org/asc/505/905/#505-905-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:40:06.141Z to 2026-09-10T00:40:06.141Z Record version: sha256:6a102bc526022b0c25c18da12e4233e2d00262a81fedb44d371adf9e1340929f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Generally, the earnings of [agricultural cooperatives](https://asc.understandingaccounting.org/glossary/a/#agricultural-cooperative "The Agricultural Marketing Act of 1929 defines a cooperative association as any association in which farmers act together in processing, preparing for market, handling, and/or marketing the farm products of persons so engaged, and also means any association in which farmers act together in purchasing, testing, grading, processing, distributing, and/or furnishing farm supplies and/or farm business services. Provided, however, that such associations are operated for producers or purchasers and conform to one or both of the following requirements: No member of an agricultural cooperative association is allowed more than one vote because of the amount of stock or membership capital he may own therein. The association does not pay dividends on stock or membership capital in excess of 8 percent per year. In addition to meeting either of the requirements in this paragraph, the association shall not deal in farm products, farm supplies, and farm business services with or for nonmembers of an agricultural cooperative in an amount greater in value than the total amount of such business transacted by it with or for members. All business transacted by any cooperative association for or on behalf of the United States or any agency or instrumentality thereof shall be disregarded in determining the volume of member and nonmember business transacted by such association.") are classified as either [patronage](https://asc.understandingaccounting.org/glossary/p/#patronage "The amount of business done with a cooperative by one of its patrons. Patronage is measured by either the quantity or value of commodities received from patrons by a marketing cooperative and the quantity or value of the goods and services sold to patrons by a supply cooperative.") or nonpatronage. The excess of revenues over costs resulting from transactions for or with [patrons](https://asc.understandingaccounting.org/glossary/p/#patrons "Any individual, trust, estate, partnership, corporation, or agricultural cooperative with or for whom a cooperative does business on a cooperative basis, whether a member of an agricultural cooperative or nonmember of an agricultural cooperative.") shall be classified as patronage source earnings. Nonpatronage earnings result from transactions other than those with or for patrons. Examples are nonpatronage income from investments in securities, rental income from nonpatronage activities, and income earned on sales or purchases made on a nonpatronage basis. ##### [505-905-45-2](https://asc.understandingaccounting.org/asc/505/905/#505-905-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:40:06.141Z to 2026-09-10T00:40:06.141Z Record version: sha256:de8fc8c621b9f63ea158f1af89f235f2feb01994ef6dfee72425a588081e1b4e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [505-905-45-3](https://asc.understandingaccounting.org/asc/505/905/#505-905-45-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:40:06.141Z to 2026-09-10T00:40:06.141Z Record version: sha256:5d4f9f802d85eea8008bdbd4a27cca9debc73e27c8d4d39d09528743d5639798 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Various forms of allocated equities arising from patronage are used by cooperatives. Two of the most commonly used forms are the following: 1. a Retained patronage allocations. Retaining [patronage earnings](https://asc.understandingaccounting.org/glossary/p/#patronage-earnings "The excess of a cooperative's revenues over its costs arising from transactions done with or for its patrons. Generally a significant portion of those earnings is allocated to the cooperative's patrons in the form of cash, allocated equities, or both.") through methods such as the issuance of qualified or nonqualified [written notices of allocation](https://asc.understandingaccounting.org/glossary/w/#written-notice-of-allocation "Any capital stock, revolving fund certificate, retain certificate, certificate of indebtedness, letter of advice, or other written notice to the recipient that states the dollar amount allocated to the patron by the cooperative and the portion that constitutes a patronage dividend.") is a major form of financing by cooperatives. 2. b Per-unit [retains](https://asc.understandingaccounting.org/glossary/r/#retains "Amounts determined on a per-unit basis or as a percentage of patronage earnings that are withheld by cooperatives from distributions and allocated to patrons' capital accounts."). Per-unit retains are used in marketing cooperatives in accordance with debt agreements, bylaws, or board of directors' authorizations. These amounts are determined without regard to earnings and may be based on a rate per ton or on a percentage of the dollar amount of raw product delivered. Amounts are withheld from payments to patrons for deliveries of raw products and are credited to the account of each [patron](https://asc.understandingaccounting.org/glossary/p/#patrons "Any individual, trust, estate, partnership, corporation, or agricultural cooperative with or for whom a cooperative does business on a cooperative basis, whether a member of an agricultural cooperative or nonmember of an agricultural cooperative."). ##### [505-905-45-4](https://asc.understandingaccounting.org/asc/505/905/#505-905-45-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:40:06.141Z to 2026-09-10T00:40:06.141Z Record version: sha256:4bf8ca4b52ff61a26a5c262c73b1bea6505ab55701b1970bf27f531a7780fbee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [505-905-45-5](https://asc.understandingaccounting.org/asc/505/905/#505-905-45-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:40:06.141Z to 2026-09-10T00:40:06.141Z Record version: sha256:30d8c4ed8322c0efc12d67e30ab4a2c2989be9734a305925a266437cfc8bd90c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [505-905-45-6](https://asc.understandingaccounting.org/asc/505/905/#505-905-45-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:40:06.141Z to 2026-09-10T00:40:06.141Z Record version: sha256:c9187003d34583ed66389127ed9a69cdf23b59ee4805ecf3f04131f4cada6161 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [505-905-45-7](https://asc.understandingaccounting.org/asc/505/905/#505-905-45-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:40:06.141Z to 2026-09-10T00:40:06.141Z Record version: sha256:b36431f254e880059cbc891f5d8004377338422ce98aa01361dd9b8a21bfede3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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.