BIM55134 - Farming: Basic Payment Scheme: Accountancy Treatment

The accountancy treatment will depend on the standards and accounting policies that are being applied. Where ‘Old UK GAAP’ is applied then the expected treatment of BP will be aligned to that presented in the joint ICAEW and ICAS paper published in May 2005 and reproduced with permission as appendix 2 to the Tax Bulletin Special Edition published in June 2005.

Where FRS 102 is applied the BP will be accounted for as a form of government grant with income and a related asset recognised at the fair value of the consideration received when there is reasonable assurance that:

        i) the entity will comply with the condition attaching to them; and
       ii) the grants will be received.

The timing of recognition of income may vary depending on whether the performance or accruals model is applied. 

The PE entitlement represents an intangible asset and would be initially recognised at cost.  Where the cost model is applied the intangible is carried at cost less any accumulated amortisation and impairment losses.

Amortisation and impairment charges on the intangible asset would be recognised as expenses in the P&L.

Where the revaluation model is applied the intangible asset shall be carried at a revalued amount, being its fair value at the date of revaluation less any subsequent accumulated amortisation and subsequent accumulated impairment losses.

Increases in the carrying value of the intangible as a result of a revaluation are recognised in other comprehensive income except, the increase is recognised in profit or loss where it reverses a revaluation decrease of the same assets previously recognised in profit or loss. 

A revaluation decrease is recognised in other comprehensive income to the extent of any previous revaluation increase in respect of that asset.  Otherwise, it is recognised in the profit or loss.