For the Accounting Nerds
Want the nerdy version? Here is the IFRS accounting brief:
For plants and produce, we look to IAS 41 Agriculture, which deals with agricultural produce to the point of harvest. For product we look to IAS 2 Inventories.
According to IAS 41, a biological asset is a living animal or plant and agricultural produce is the harvested product of the entity’s biological assets. This table is a partial reference from IAS 41, and shows examples of biological assets and their related agricultural produce for consideration:
Recognition
The recognition criteria are similar for plants, produce and product. An entity shall recognize these inventories when, and only when:
● The entity controls the assets as a result of past events,
● It is probable that future economic benefits associated with the asset will flow to the entity; and
● The fair value or cost of the asset can be measured reliably.
When applying these criteria to marijuana plants, produce and product, we need to consider if the plants, buds, and product are owned and controlled by the entity is a matter of fact.
If your business has taken reasonable measures to ensure the physical safety of your inventory, and you have a license to grow and/or sell (mitigating the risk of seizure of your assets), you are deemed to control the assets
Future economic benefits associated with the plants, bud and product are probable because they can be sold in exchange for cash. The fair value of the plants and buds can be measured reliably as discussed in the following paragraph on measurement.
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