# ASC 905-10-05: Agriculture — Overall — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/905/10/#05-overview-and-background) 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): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:76f665bbccf78039d106d6e5c745aba2afb553923f61032baaa720549ebba99d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 905-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/905/10/#05-overview-and-background) SEC content: no ##### [905-10-05-1](https://asc.understandingaccounting.org/asc/905/10/#905-10-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:d54051c75fe005bbc48eb3c10ba1d0776b43c0785f3238944ad8a83d5c1cd55e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Agriculture Topic includes the following Subtopics relating to [agricultural producers](https://asc.understandingaccounting.org/glossary/a/#agricultural-producers "Farmers and ranchers including, for example, those who raise crops from seeds or seedlings, breed livestock (whether registered or commercial), and feed livestock in preparation for slaughter."), [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."), and [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.") of such cooperatives: 1. a Overall 2. b Presentation of Financial Statements 3. c Receivables 4. d Investments—Other 5. e Inventory 6. f Property, Plant, and Equipment 7. g Liabilities 8. h Equity 9. i Revenue Recognition—Cooperatives 10. j Cost of Sales and Services. Each Subtopic provides background on the guidance provided. ##### [905-10-05-2](https://asc.understandingaccounting.org/asc/905/10/#905-10-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:b3aa497578add18f20287d4c7737add4cac5baac69542f52d1dd20b2786fa3be Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance throughout this Topic for accounting for different entities in the agricultural industry is presented in the following three Subsections: 1. a General 2. b Cooperatives 3. c Cooperatives—Patrons. ##### [905-10-05-3](https://asc.understandingaccounting.org/asc/905/10/#905-10-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:b45e39d2f9c1d5963aeda0a1ef0a1a280a91566e6147e4d1ef34c6717cc79d27 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The General Subsections provide guidance for all entities operating in the agricultural industry, except those noted in paragraph [905-10-15-4](https://asc.understandingaccounting.org/asc/905/10/#905-10-15-4). Agricultural producers use every form of business organization, from sole proprietorship to a large publicly held entity. They engage in numerous activities, for example: 1. a Growing wheat, milo, corn, and other grains 2. b Growing soybeans, vegetables, sugar beets, and sugarcane 3. c Growing citrus fruits, other fruits, grapes, berries, and nuts 4. d Growing cotton and other vegetable fibers 5. e Operating plant nurseries 6. f Breeding and feeding cattle, hogs, and sheep, including animals for wool production 7. g Operating dairies 8. h Operating poultry and egg production facilities 9. i Breeding horses 10. j Raising mink, chinchilla, and similar small animals 11. k Raising fish and shellfish. In addition, the operations of agricultural producers often involve various combinations of those activities. Agricultural practices and products may vary still further because of differences in temperature, soil, rainfall, and regional economics. Farm products may be used in related activities, such as the feeding of hay and grain to [livestock](https://asc.understandingaccounting.org/glossary/l/#livestock "Registered and commercial cattle, sheep, hogs, horses, poultry, and small animals bred and raised by agricultural producers."), or they may be marketed directly by the producer. Producers often sell products in accordance with government programs or through agricultural cooperatives. Marketing strategies may include forward contracts or commodity [futures contracts](https://asc.understandingaccounting.org/glossary/f/#futures-contract "A standard and transferable form of contract that binds the seller to deliver to the bearer a standard amount and grade of a commodity to a specific location at a specified time. It usually includes a schedule of premiums and discounts for quality variation.") to reduce the risks of fluctuations in market prices. ##### [905-10-05-4](https://asc.understandingaccounting.org/asc/905/10/#905-10-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:c7b07bd8cdbc9817e9510f577252560a867fbff2fe190e847586719c118b173f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Agricultural producers often borrow to finance [crop development costs](https://asc.understandingaccounting.org/glossary/c/#crop-development-costs "Costs incurred up to the time crops are produced in commercial quantities, including the costs of land preparation, plants, planting, fertilization, grafting, pruning, equipment use, and irrigation.") and the costs of acquiring facilities and equipment. ### Cooperatives ##### [905-10-05-5](https://asc.understandingaccounting.org/asc/905/10/#905-10-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:dcccfee94687af8ce16731c0ea925d23f8096e63926e5a2696ab537b3d75993c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A cooperative typically has the following characteristics: 1. a Assets are distributed periodically to [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.") on a [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.") basis. In certain situations, however, assets in the amount of net-of-tax earnings may be accumulated by the cooperative and may or may not be allocated to patrons' accounts. 2. b Members control the organization in their capacity as patrons and not as equity investors. 3. c Membership is limited to patrons. 4. d The return that can be paid on capital investment is limited. 5. e At least 50 percent of the cooperative's business is done on a patronage basis. ##### [905-10-05-6](https://asc.understandingaccounting.org/asc/905/10/#905-10-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:3d528b522cfb4ec354112e234a3e5526062f6e43df224f2a848b2e7304c66e62 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The main difference between [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.") and other business entities is that cooperatives and their patrons operate as single economic units to accomplish specific business purposes, such as the marketing of farm products, the purchase of supplies, or the performance of services for the benefit of the patrons. The aim is to reduce costs, increase sales proceeds, and share risks through the increased bargaining power that results from the patrons' combined resources and buying power. The patron's role as an investor is secondary and incidental to his business relationship with the cooperative. ##### [905-10-05-7](https://asc.understandingaccounting.org/asc/905/10/#905-10-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:28e8d10b1888734d5d583c04a2aa09cb95037a2089cee441a0c1daa354b1dceb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Another difference between cooperatives and other business corporations is that the cooperative's bylaws usually require it to distribute assets to patrons, or allocate to patrons' accounts amounts equal to its earnings, on the basis of their patronage. Distributions to patrons are different from dividend payments to stockholders in other entities. ##### [905-10-05-8](https://asc.understandingaccounting.org/asc/905/10/#905-10-05-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:ac4f60836e67ce08f7404ed5aba3c57058a10e06cd68cd688a04c54fc2c598c2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under the [price adjustment theory](https://asc.understandingaccounting.org/glossary/p/#price-adjustment-theory "The distribution of earnings on the basis of patronage."), a cooperative agrees to do business at cost. In a [purchasing cooperative](https://asc.understandingaccounting.org/glossary/p/#purchasing-cooperative "Purchasing cooperatives purchase, manufacture, distribute, and provide feed, petroleum products, fertilizer, chemicals, farm supplies, and services of various kinds to their patrons. See Supply Cooperative."), for example, a patron may be charged more than cost at the time of purchase; however, the cooperative normally must return to the patron all amounts received in excess of cost, including costs of operation and processing. ##### [905-10-05-9](https://asc.understandingaccounting.org/asc/905/10/#905-10-05-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:176e946cd0889fafd4bfc4f2aea10e10c9bc50dc7e629c1830d73c0330611b5b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If certain requirements are met, the Internal Revenue Code permits cooperatives tax deductions for earnings allocated to their patrons. Earnings not so allocated are taxed at corporate income tax rates. Both [exempt and nonexempt cooperatives](https://asc.understandingaccounting.org/glossary/e/#exempt-and-nonexempt-cooperatives "Cooperatives classified according to their federal income tax status. Both types are permitted to deduct from taxable income patronage distributed or allocated on a qualified basis to patrons to the extent that the distributions represent earnings of the cooperative derived from business done with or for the patrons. In addition, cooperatives meeting the requirements of Internal Revenue Code section 521 (exempt cooperatives) are permitted to deduct limited amounts paid as dividends on capital stock and distributions to patrons of income from business done with the U.S. government or its agencies and income from nonpatronage sources.") are subject to federal income taxes on [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.") that are not distributed in cash or allocated on a qualified basis. Nonexempt cooperatives are subject to income taxes on earnings arising from sources other than patronage. ##### [905-10-05-10](https://asc.understandingaccounting.org/asc/905/10/#905-10-05-10) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:ab1206dff57cd4e4c700811dccd7a7b6f36ad3f01808d8a5b72c426fdc08ec4b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cooperatives generally try to buy or sell at the current market price. Periodically, they determine total costs and make distributions to patrons in the form of cash, certificates, or other notices of allocation based on the excess of revenues over costs. ##### [905-10-05-11](https://asc.understandingaccounting.org/asc/905/10/#905-10-05-11) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:0beac1b9fabf542945c55497ac7d03801c07f9d4c6e403d47e8e03b13e83ab81 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The two major types of cooperatives are supply cooperatives and marketing cooperatives: 1. a [Supply](https://asc.understandingaccounting.org/glossary/s/#supply-cooperative "A cooperative that supplies to its patrons goods and services used by them in producing their products. Supply or purchasing cooperatives obtain or produce such items as building materials, equipment, feed, seeds, fertilizer, chemicals, and petroleum products for their patrons. See Purchasing Cooperative.") or [purchasing cooperatives](https://asc.understandingaccounting.org/glossary/p/#purchasing-cooperative "Purchasing cooperatives purchase, manufacture, distribute, and provide feed, petroleum products, fertilizer, chemicals, farm supplies, and services of various kinds to their patrons. See Supply Cooperative.") 2. b [Marketing cooperatives](https://asc.understandingaccounting.org/glossary/m/#marketing-cooperative "A cooperative that markets the products (crops, livestock, and so on) produced by its patrons. Marketing cooperatives provide means for agricultural producers to process and sell their products."). ##### [905-10-05-12](https://asc.understandingaccounting.org/asc/905/10/#905-10-05-12) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:64045999b116065c3b2977efd10e3adc324f48c58f7987ea2da824462a1ebe73 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Services related to those functions are provided by some supply and marketing cooperatives; they are also provided by separate associations known as [service cooperatives](https://asc.understandingaccounting.org/glossary/s/#service-cooperative "A cooperative that provides to its patrons such services as trucking, storage, accounting, and data processing."), which include [bargaining cooperatives](https://asc.understandingaccounting.org/glossary/b/#bargaining-cooperative "A special type of service cooperative that serves its members by negotiating with processors on their behalf."). The members of local cooperatives are [agricultural producers](https://asc.understandingaccounting.org/glossary/a/#agricultural-producers "Farmers and ranchers including, for example, those who raise crops from seeds or seedlings, breed livestock (whether registered or commercial), and feed livestock in preparation for slaughter.") whose activities are generally centralized. The members of federated cooperatives are other cooperatives whose activities are regional. Some cooperatives have both individual producers and other cooperatives as members. ### Cooperatives—Patrons ##### [905-10-05-13](https://asc.understandingaccounting.org/asc/905/10/#905-10-05-13) Pending content: no Source downloaded (UTC): 2026-09-10T02:08:40.144Z to 2026-09-10T02:08:40.144Z Record version: sha256:56e3b3bc42739167b3ccf7356e4637fd5a2b127bbad2e8fc7257ac2543d5d90b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For an overview and background of cooperative members and [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.") 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."), see the [Cooperatives Subsection](https://asc.understandingaccounting.org/asc/905/10/#05-overview-and-background) of Section 905-10-05.