Growing crop definition
/What is a Growing Crop?
A growing crop is a bush, field, tree, or vine crop prior to being harvested. Field and row crops are typically planted from seeds or transplanted from beds, and then developed to the point of harvesting within a period of months. When these crops have a cycle of less than one year, they are referred to as annuals. Examples of annuals are barley, beans, cabbage, and corn.
Characteristics of a Growing Crop
The following are key characteristics of a growing crop that should be considered for accounting purposes:
Biological transformation. Growing crops undergo biological processes such as germination, photosynthesis, and growth, which result in quantitative and qualitative changes over time. These transformations add value to the asset.
Non-depreciable. Unlike machinery or buildings, growing crops are not depreciable because their value increases as they mature until harvest.
Valuation uncertainty. Fair value measurement involves assumptions about market prices, growth stages, yield expectations, and market conditions, which can introduce uncertainty. Market volatility for agricultural produce can significantly impact valuation.
Lifecycle impact. The lifecycle of a crop (annual, perennial, etc.) determines whether the asset remains biological (e.g., fruit on trees) or transitions to inventory (e.g., harvested grains).
Accounting for Growing Crops
All costs of growing crops are to be accumulated until harvesting time. This rule includes crop costs that are incurred before planting, such as the cost of soil preparation. Some costs associated with growing crops are not incurred until after the harvest, perhaps not until the next year. For example, there may be a residue of harvested crops in the fields that is not cleared until the start of the next growing season. These costs should be accrued and allocated to the harvested crop.
The cost of growing crops should be reported at the lower of cost or market.