A new accounting standard has been introduced which affects certain items that appear in a set of farming accounts.

Herd animals 

Up until now there has not been any consistent approach to how animals held on the herd basis have been reflected in accounts although they will have often been included at their tax cost. This can result in animals held in the herd today being included at the cost of animals originally brought into the herd many years ago.

Under the new standard the animals have to be brought into the accounts at either their market value or at their cost with a deduction for depreciation. In many cases this will lead to an uplift in the accounts value of herd animals. 

Other livestock

Non-herd animals have previously been valued at cost but the new standard gives a choice of valuing these animals at either depreciated cost or market value. Using market value would normally give a higher value for the animals, but it would also increase tax liabilities and, for this reason, the cost basis will continue to be used in many cases.

Basic Payment Entitlements

Up until now any entitlements allocated to farmers under the scheme without a cost will not have been reflected in accounts. Under the new standard the initial capital value of the entitlements needs to be shown on the balance sheet together with a deferred income account. This value is then released as income through the profit and loss account with a corresponding amortisation charge. New income and expenditure entries will therefore appear. 

Basic Payment Income

Under the new standard Basic Payment income can only be recognised in accounts when it is reasonably certain that all of the scheme conditions will be met. This will not always be clear until after the end of the scheme year and so could affect how Basic Payment income is included in accounts with an accounting date that falls within the Basic Payment Scheme year.