Dairy and livestock

A dairy farm earns money in two ways at once: it sells milk every day, and its herd changes in value as heifers mature, calves are born and old cows are culled. IAS 41 accounts for both, which means a dairy farmer's profit includes changes in the value of the herd alongside the milk cheque. This guide works through a year on a dairy farm, separating price and physical changes in the herd, and covers calves, milk at harvest, feed costs, culling, beef cattle, poultry and US GAAP.

By Muhammad Bilal, Chartered Accountant. Reviewed by Awais Jameel, Chartered Accountant. 3 minute read.

Short answer

Livestock accounting under IAS 41 measures animals, including dairy cows, breeding stock and animals being raised for meat, at fair value less costs to sell at each reporting date, with changes in profit or loss. Dairy cows are bearer animals, but unlike bearer plants they stay in IAS 41 rather than moving to IAS 16. Calves are recognised at fair value less costs to sell when born, a gain. Milk, wool and eggs are agricultural produce, measured at fair value less costs to sell at the point of harvest and then accounted for as inventory. Feed, veterinary and labour costs are expensed as incurred, because the fair value model already captures the animals' growth. In this guide's example, a 200-cow dairy herd produces US$ 630 thousand of milk revenue and a gain from calves and growing heifers.

At a glance

Herd
Fair value less costs to sell
Dairy cows
Bearer animals, still IAS 41
Calves
Gain at birth
Milk
Fair value at harvest, then inventory
Feed and vet costs
Expensed
Change in herd value
Split price and physical
Dairy and livestockHerd: Fair value less costs to sell; Dairy cows: Bearer animals, still IAS 41; Calves: Gain at birth; Milk: Fair value at harvest, then inventory; Feed and vet costs: Expensed; Change in herd value: Split price and physical.KEY FACTS AT A GLANCEDairy and livestockHerdFair value less costs tosellDairy cowsBearer animals, still IAS41CalvesGain at birthMilkFair value at harvest,then inventoryFeed and vet costsExpensedChange in herd valueSplit price and physicalTax BakersDairy and livestockHerd: Fair value less costs to sell; Dairy cows: Bearer animals, still IAS 41; Calves: Gain at birth; Milk: Fair value at harvest, then inventory; Feed and vet costs: Expensed; Change in herd value: Split price and physical.KEY FACTS AT A GLANCEDairy and livestockHerdFair value less costs to sellDairy cowsBearer animals, still IAS 41CalvesGain at birthMilkFair value at harvest, then inventoryFeed and vet costsExpensedChange in herd valueSplit price and physicalTax Bakers
Key facts at a glance, as set out in this guide.

How is a dairy herd measured?

Each animal, or group of similar animals, is measured at fair value less costs to sell, based on prices at livestock markets or sales of dairy cows of the same age, breed and yield, adjusted for location and condition. Dairy cows are bearer animals: they are kept to produce milk and calves over several years. The IASB moved bearer plants to IAS 16 in 2016 but deliberately left bearer animals in IAS 41, because animals have active markets and their fair value changes significantly as they age. See biological assets at fair value.

Livestock accounting: a year on a dairy farm

A farm starts the year with 200 milking cows valued at US$ 1,800 each, 360 thousand. During the year, 180 calves are born, worth 300 each at birth; it sells 150 of them for 320 each and keeps the rest as replacement heifers. 40 heifers join the milking herd, an increase in value of 1,200 each as they mature, and 30 old cows are culled and sold for 900 each. At the year end, the market price of milking cows falls to 1,700. The herd produces 1,500 thousand litres of milk, sold at US$ 0.42 a litre.

Change in herd value from births, growth and prices (US$ thousand)Change in herd value from births, growth and prices (US$ thousand)360Openingmilking herd+54Calvesborn+48Heifersmaturing-20Pricechange442Before salesand culls
Physical change and price change are shown separately.
US$ thousandAmountAccounting
Calves at birth: 180 × 30054Gain, physical change
Heifers maturing: 40 × 1,20048Gain, physical change
Price fall on milking herd: 200 × (1,800 - 1,700)(20)Loss, price change
Milk sold: 1,500 thousand litres × 0.42630Revenue, under IFRS 15

The physical change of 102 thousand shows the herd grew in substance, while the price fall of 20 thousand reflects the market. Calves and culled cows sold are derecognised at their fair value less costs to sell, so selling them produces little further gain. IAS 41 encourages this split, and many dairy companies present herd value changes separately from operating profit so readers can see the milk business on its own.

How is milk accounted for?

Milk is agricultural produce. At the point of harvest, when it is drawn from the cow, it is measured at fair value less costs to sell, which then becomes its cost as inventory under IAS 2. Because milk is usually collected daily and sold quickly, its harvest value and sale price are close, so in practice revenue under IFRS 15 equals the milk cheque, with adjustments for quality payments, seasonal pricing and any cooperative pool pricing, which is variable consideration. See agricultural produce after harvest.

Why are feed and veterinary costs expensed?

Under the fair value model, the cost of raising animals is not added to their carrying amount: feed, bedding, veterinary care and labour are expensed as incurred, and the value they create shows up in the fair value gain. That differs from a cost model, where raising costs are capitalised. It means a farm's expenses and its fair value gains need to be read together to understand its margins.

How are beef cattle, sheep and poultry treated?

Animals raised for slaughter are consumable biological assets, measured at fair value less costs to sell until slaughter, when the carcass becomes agricultural produce. Fair value for growing animals is based on weight and grade, often from meat processors' price grids. Sheep produce wool, harvested at shearing. Poultry flocks raised for meat turn over in weeks, so their fair value at the year end is often close to accumulated cost, while laying hens are bearer animals producing eggs. See poultry farming.

How does US GAAP differ?

Under ASC 905, animals raised for sale are inventory at cost, and breeding and dairy animals are long-lived assets: their raising costs are capitalised until maturity and then depreciated over their productive lives. So a US dairy farm shows no fair value gains on its herd. See agriculture accounting.

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Questions people ask

Are dairy cows measured at fair value under IFRS?

Yes. Dairy cows are bearer animals but remain in IAS 41, measured at fair value less costs to sell.

How are newborn calves accounted for?

They are recognised at fair value less costs to sell when born, with a gain in profit or loss.

When is milk measured at fair value?

At the point of harvest, when drawn from the cow; it then becomes inventory at that value.

Are feed costs capitalised into livestock?

No. Under the IAS 41 fair value model, feed, veterinary and labour costs are expensed as incurred.

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: IFRS 13 Fair Value Measurement
  3. FASB Accounting Standards Codification: Topic 905, Agriculture

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 issuesAgricultureBiological assets at fair valueAgricultureAgricultural produce after harvest

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