Auditing biological assets on farms

How to audit livestock, crops and produce measured at fair value less costs to sell under IAS 41: scoping, counts, valuers and adjustments.

By Achekam · 11 October 2026 · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya

A cattle ranch in the Free State, a tea estate in Kericho, a poultry operation outside Ibadan: each carries assets on its balance sheet that grow, breed, age and die between one count and the next. Their value moves with market prices the farmer does not control, and the figure in the statements is an estimate from the day it is recorded.

Auditing those balances takes more than a stock count. The team has to decide what falls under IAS 41 Agriculture at all, test a fair value that depends on markets and assumptions, and verify that animals and plants exist in the numbers claimed. This article works through each step.

What IAS 41 covers, and what it does not

The IFRS Foundation describes agricultural activity under IAS 41 as the management of the biological transformation of biological assets, meaning living animals or plants, and their harvest for sale, for conversion into agricultural produce or into additional biological assets.

The boundaries matter for scoping:

• Processing after harvest is outside IAS 41. The IFRS Foundation gives the examples of grapes processed into wine and wool processed into yarn. A farm that runs its own dairy or juicing plant has inventory on the processing side, not biological assets.
• Land is separate. IAS 41 requires biological assets attached to land, such as trees in a plantation forest, to be measured separately from the land.

Bearer plants follow IAS 16

Under IAS 41, bearer plants are accounted for under IAS 16 Property, Plant and Equipment. Tea bushes, fruit trees and vines that produce crop after crop are typical. But the IFRS Foundation states that IAS 41 still applies to the produce growing on bearer plants. So for a citrus orchard, the trees are property, plant and equipment, and the fruit on them at year end is a biological asset.

Get this split wrong and every later test is aimed at the wrong number. Agree the client's classification of each category to its accounting policy before testing values.

Fair value less costs to sell

Under IAS 41, biological assets other than bearer plants are measured at fair value less costs to sell, and agricultural produce is measured on the same basis at the point of harvest. The standard says costs to sell include commissions, levies, and transfer taxes and duties. Changes in the fair value of biological assets go to profit or loss.

That last point is why these balances deserve attention. A higher price assumption or a heavier average weight goes straight to profit, so any pressure on reported results finds an easy outlet here. For each category, the team should understand:

1. The price source. An auction price, an abattoir price, a published market index, or a recent sale by the client? How close is the source to the client's actual market and location?
2. The unit of measurement. Per head, per kilogram, per hectare or per tonne, and whether the client's records support that unit.
3. Adjustments for condition. Age, weight, grade or yield, and how the client measured them.
4. Costs to sell. Commissions, levies and transport to market, and whether all are deducted.

Treat it as an accounting estimate and apply the same scepticism you would to any other. Our guide to auditing accounting estimates sets out the general approach.

Counting livestock and crops

Existence comes before value. For livestock, attend a count at or near year end:

• understand how the farm identifies animals (tags, brands, camp registers) and test from register to animal and from animal to register;
• count by camp or pen, with the farm manager present, and agree totals to the herd register;
• reconcile movements between the count date and year end: births, deaths, purchases, sales and slaughter;
• note the condition and class of animals, since these drive the price.

For growing crops, physical counting is replaced by inspection and records: planted areas against planting records, inspection of the fields, and yield estimates compared with prior seasons. For produce held after harvest, normal inventory count procedures apply.

Valuers as the auditor's expert

Many farms rely on a valuer, an agronomist or a stock agent for the year-end figure. When the client engaged that person, the work is management's evidence and needs testing like any other: the expert's competence and objectivity, the method, and the inputs taken from the farm's records.

Where the estimate is significant and the team lacks the knowledge to challenge it, the firm may engage its own expert, for example a livestock auctioneer or a forestry valuer. Agree in writing what the expert will do, review the work, and decide whether it is adequate for the audit's purposes. Our article on using an expert covers the agreement and the evaluation.

Recording the work in Achekam

In Achekam, the team's count work can go into Inventory Observation, which keeps its work against the chosen engagement. The ISA numbers shown on its badges are labels, not evidence that a standard has been met; the team still documents its own procedures and conclusions.

The biological asset lines in the lead schedules come from the engagement's trial balance and trace back to the lines behind them. If the team concludes the fair value is overstated, or that bearer plants were wrongly included at fair value, staff record an audit adjustment on the affected line with a reason, and raise a finding from the working paper that is later closed or withdrawn. That keeps the evidence, the adjustment and the conversation with the client in one place.

A short checklist for farm audits

• Classification agreed: biological assets, bearer plants, produce, processed inventory and land.
• Count attended, or alternative evidence obtained, and movements to year end reconciled.
• Price sources identified, tested and compared with actual sales after year end.
• Costs to sell complete.
• Fair value movements agreed to profit or loss.
• Valuer's work evaluated, whoever engaged them.
• Disclosure reviewed for the assumptions that matter.

The IFRS Foundation's summary of IAS 41 Agriculture sets out the scope, the measurement basis and the treatment of bearer plants and produce, and is the first reference to check against the client's policy.

Before the next agricultural year end, agree the count date and the valuation approach with the client at planning. On farms, the season decides the timetable, and a missed count cannot be repeated.

General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.