Grants for agriculture

Farming is heavily supported by governments, through income support, payments for environmental practices, planting and forestry grants, and disaster relief. IFRS treats these grants differently depending on what they relate to, and agriculture is the one area where IAS 20 does not always apply. This guide explains when IAS 41 and IAS 20 each apply, works through a conditional forestry grant and a grant for planting an orchard, and covers income support, environmental schemes, disaster relief, presentation and US GAAP.

By Mirza Fahad Baig, Chartered Accountant. Reviewed by Hamza Fida, Chartered Accountant. 4 minute read.

Short answer

Government grants for agriculture follow two standards. For grants related to a biological asset measured at fair value less costs to sell, IAS 41 applies: an unconditional grant is recognised in profit or loss when it becomes receivable, and a conditional grant, such as one requiring the farmer not to harvest a forest for several years, only when the conditions are met, or progressively if part of the grant is retained as time passes. For grants related to bearer plants, other assets at cost, or to costs and income, IAS 20 applies: grants are recognised in profit or loss as the related costs are expensed or the assets depreciated. Income support payments are recognised when the farmer is entitled to them. In this guide's example, a US$ 100 thousand afforestation grant is recognised at 20 thousand a year as conditions are met.

At a glance

Grant for biological asset at fair value
IAS 41
Unconditional
Profit or loss when receivable
Conditional
When conditions are met
Grant for bearer plants or costs
IAS 20
IAS 20 method
Matched with costs or depreciation
Income support
When entitled
Grants for agricultureGrant for biological asset at fair value: IAS 41; Unconditional: Profit or loss when receivable; Conditional: When conditions are met; Grant for bearer plants or costs: IAS 20; IAS 20 method: Matched with costs or depreciation; Income support: When entitled.KEY FACTS AT A GLANCEGrants for agricultureGrant for biological asset at fairvalueIAS 41UnconditionalProfit or loss whenreceivableConditionalWhen conditions are metGrant for bearer plants or costsIAS 20IAS 20 methodMatched with costs ordepreciationIncome supportWhen entitledTax BakersGrants for agricultureGrant for biological asset at fair value: IAS 41; Unconditional: Profit or loss when receivable; Conditional: When conditions are met; Grant for bearer plants or costs: IAS 20; IAS 20 method: Matched with costs or depreciation; Income support: When entitled.KEY FACTS AT A GLANCEGrants for agricultureGrant for biological asset at fair valueIAS 41UnconditionalProfit or loss when receivableConditionalWhen conditions are metGrant for bearer plants or costsIAS 20IAS 20 methodMatched with costs or depreciationIncome supportWhen entitledTax Bakers
Key facts at a glance, as set out in this guide.

Which standard applies to an agricultural grant?

IAS 41 applies to government grants related to a biological asset measured at its fair value less costs to sell, including grants requiring the farmer not to engage in a specified activity. IAS 20 applies to all other grants: those related to biological assets measured at cost because fair value cannot be measured reliably, to bearer plants and other property, plant and equipment, and to costs or income. The split exists because a grant for an asset already at fair value would otherwise distort the asset's measurement.

How does IAS 41 treat grants?

An unconditional grant related to a biological asset at fair value less costs to sell is recognised in profit or loss when, and only when, it becomes receivable. A conditional grant is recognised only when the conditions are met. If the terms allow part of the grant to be kept according to the time that has passed, the farmer recognises that part as time passes. No grant is deducted from the carrying amount of the biological asset.

Grants for agriculture: a conditional forestry grant

A government pays a forestry company US$ 100 thousand when it plants a new forest, on condition that it does not fell the trees for 5 years. If it fells early, it must repay the grant in proportion to the years remaining. The forest is a biological asset measured at fair value less costs to sell.

Grant income recognised each year (US$)Grant income recognised each year (US$)20,0002,500Year 120,0002,500Year 220,0002,500Year 320,0002,500Year 420,0002,500Year 5Forestry grant, IAS 41Orchard grant, IAS 20
Conditional grants are recognised as the conditions are met.

Because a fifth of the grant becomes non-repayable each year, the company recognises 20 thousand in profit or loss each year as the condition is met for that year, and holds the rest as a liability. If the terms required the whole grant to be repaid on any breach during the 5 years, nothing would be recognised until the end of year 5. Compare a US$ 50 thousand grant for planting an apple orchard, a bearer plant under IAS 16: under IAS 20 it is either deducted from the orchard's cost or held as deferred income, and recognised over the orchard's 20-year productive life, 2.5 thousand a year. See bearer plants.

How are income support and environmental payments treated?

Direct payments that support farm incomes, such as those under the EU's Common Agricultural Policy, are usually grants related to income, recognised in profit or loss when the farmer meets the conditions for the claim year and is entitled to the payment. Payments for environmental practices, such as keeping land in good condition, leaving buffer strips or reducing fertiliser, are recognised as the farmer carries out the required practices over the scheme period. If a scheme requires commitments over several years with repayment for breach, the farmer considers whether it is reasonably assured of meeting them. Entitlements to receive payments, where they can be traded, may be intangible assets.

What about disaster relief and compensation?

Compensation for losses from drought, floods or animal disease, such as payments for culled livestock, is recognised when it becomes receivable, which is usually when the government has approved the payment and the farmer has met the conditions. It is presented separately from the loss it compensates rather than netted against it, and the loss itself, such as the fall in the value of a herd, is recognised when it happens. Flocks culled for avian influenza are a common case; see poultry farming.

How are agricultural grants presented?

IAS 41 requires disclosure of the nature and extent of grants recognised, unfulfilled conditions and other contingencies, and significant expected decreases in grants. IAS 20 grants related to assets are shown as deferred income or deducted from the asset, and grants related to income are shown as other income or deducted from the related expense. See government funding for how IAS 20 applies in another industry.

How does US GAAP differ?

US GAAP has long had no recognition guidance for government grants to businesses, so many companies applied IAS 20 by analogy, with disclosures of government assistance required under Topic 832. ASU 2025-10, issued in December 2025, adds recognition guidance for grants of monetary and tangible assets, effective for public business entities for annual periods beginning after 15 December 2028. Farm subsidies are generally recognised when the farmer is reasonably assured of meeting the conditions and receiving the payment. See agriculture accounting.

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Questions people ask

Which standard applies to grants for biological assets?

IAS 41, for grants related to biological assets measured at fair value less costs to sell; IAS 20 for grants related to assets at cost, bearer plants, costs or income.

When is an unconditional agricultural grant recognised?

Under IAS 41, in profit or loss when it becomes receivable.

How is a conditional forestry grant recognised?

When the conditions are met, or progressively as time passes if part of the grant becomes non-repayable each year.

How are grants for planting orchards treated?

Under IAS 20, deducted from the cost of the bearer plants or held as deferred income, and recognised over their productive life.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IAS 41 Agriculture
  2. IFRS Foundation: IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
  3. RSM: FASB issues guidance on accounting for government grants (ASU 2025-10)

Rules and fees change. If you are reading this long after October 9, 2026, confirm the figures with the source before you rely on them.

AgricultureAgriculture accounting: the key IFRS issuesAgricultureBearer plantsAgricultureBiological assets at fair value

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This guide is general information. It is not tax or legal advice for your situation.