Accounting Policy & Practice Series

Accounting for Agricultural Producers

 

Portfolio Description

BNA Tax and Accounting Portfolio 5205, Accounting for Agricultural Producers (Accounting Policy and Practice Series), explains and analyzes financial accounting guidelines for agricultural operations.

A significant number of farm liquidations in the 1980's led to changes in ownership of agricultural land and an increasing trend in absentee ownership of farm operations. Many absentee owners are unfamiliar with agricultural production and financial management, resulting in the need for professional managers who are competent in these areas and for more education in accounting and financial management for both the professional farm managers and the absentee owners.

The accounting profession has provided limited guidance for industry-specific issues in accounting for agricultural operations. In response to this lack of guidance, the Farm Financial Standards Council (FFSC) has developed and published a set of accounting guidelines for the agricultural industry. The FFSC guidelines provide recommendations for standardized format and content of farm financial statements and disclosure notes, specific farm financial ratios with standardized definitions and methods of calculation, and suggestions for the use of standardized farm financial data and the development of a database of farm financial information. The FFSC guidelines identify and provide treatments for specific items, such as personal assets and liabilities combined with farm business assets and liabilities, raised breeding livestock, capital leases, inventories, and deferred taxes, that are acceptable alternatives to generally accepted accounting principles in widespread use in the agricultural industry.

This Portfolio presents detailed discussion and analysis of the methods, procedures, and financial statement presentations in the FFSC guidelines that are alternative to generally accepted accounting principles. The Portfolio first compares the current professional literature for agricultural operations with the FFSC guidelines. This Portfolio also provides detailed examples of the procedures required to implement the FFSC guidelines for the benefit of preparers and analysts. This Portfolio augments the current literature by providing examples of transactions and year-end procedures for preparing farm financial statements, currently not available in the FFSC guidelines or other pronouncements.

Aside from agricultural producers, many groups and individuals, including agricultural lenders, academicians, farm research specialists, representatives of the U.S. Department of Agriculture's Extension Service and Economic Research Service, agricultural economists, farm trade groups, public officials and regulators, can benefit from the use of a standardized system of financial reporting in the agricultural industry for comparative analysis.

This Portfolio may be cited as BNA Tax and Accounting Portfolio 5205, Wheeling, Accounting for Agricultural Producers (Accounting Policy and Practice Series).

Barbara M. Wheeling, Ph.D., Accounting, University of Alberta (1999); M.B.A., focus on Accounting and Finance, University of Wyoming (1989); B.S., Animal Science, North Dakota State University (1972). Ms. Wheeling worked in the Accounting Research and SEC Department at the former Coopers & Lybrand. She has consulted with agricultural producers both in the United States and internationally. An assistant professor at Montana State University-Billings, Ms. Wheeling is a member of the Northwest Farm Business Management Instructors.