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Section 34: Specialist Activities


Section 34 deals with the reporting requirements for entities applying FRS 102 in the specialist areas of agriculture, extractive activities, service concession arrangements, financial institutions, heritage assets, funding commitments and public benefit entities.

What is new?

Section 34 defines biological assets and agricultural produce, this was not defined under old GAAP and as a result would have been dealt with under SSAP 9. Under Section 34, entities have a choice to recognise and measure these under the fair value model (where it can be reliably measured) or the cost model. Under SSAP 9 such assets would be measured at the lower of cost or net realisable value.

Where the fair value model is chosen the agricultural assets are measured initially and at each reporting date at fair value less costs to sell, with changes reported in profit. Agricultural produce is measured at the point of harvest at fair value less costs to sell, and is not subsequently re-measured.

Under the cost model, the assets are measured at cost less depreciation and, where relevant, impairment (the cost model must be used if the fair value of a biological asset cannot be reliably measured).

Previously there was no specific standard for accounting for extractive industries instead this was dealt with under FRS 15, FRS 10 and the oil and gas SORP under old GAAP. Section 34 refers entities to IFRS 6 for such accounting.

Section 34 provides a further option with regard to service concessions which did not exist under old GAAP, that being the option to use the intangible asset model.

In relation to retirement benefit plans financial statements; Section 34 adds supplementary disclosure requirements for defined contribution or defined benefit plans reporting under the FRS. These were not required under old GAAP (SORP).

The other sections dealt with in Section 34 did not a have a specific standard under old GAAP.

What are the key points?

Biological assets are living animals or plants. Agricultural produce are the harvested product of the entity’s biological asset.

A service concession arrangement is one where a public sector body or public benefit entity (the grantor) contracts with a private operator to develop (or upgrade), operate and maintain infrastructure assets. To meet the definition, the following two conditions must apply:

  • The grantor controls or regulates which services, to whom, and at what price the operator provides using the infrastructure assets.
  • The grantor controls any significant residual interest in the assets at the end of the term. From the operator’s perspective, there may be two types of arrangement: in the first type, the operator receives a financial asset, being the right to receive a fixed or determinable amount of cash. In the other, the operator receives an intangible asset, being the right to charge for use of a public sector asset that it constructs and then operates and maintains for a specified period.

Section 34.17 to 34.33 also gives additional disclosure requirements that financial institutions need to adhere to under the standard.

What do accountants need to know?

Review their client portfolio to identify clients which will be affected by this standard and advise clients accordingly as to the options available.

What do Companies need to do?

For Companies who hold these types of asset, identify the choices under the standard and select the one appropriate to the entity’s circumstances.