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HMRC internal manual

Business Income Manual

Farming: stud farms: stock valuation

Except where the herd basis has been adopted, both stallions and mares should be dealt with as stock in trade and valued individually at the beginning and end of each year in accordance with relevant GAAP on the usual basis of (i) cost or net realisable value (see BIM55705), whichever is the lower, or (ii) at fair value less costs to sell where FRS 102 or IAS 41 are applied. Stock valuations should also include any foals and, where appropriate, stud fees paid (see below).

In the case of stallions (but not mares) a rule of thumb method of valuation, whereby the cost of the animal is written off by equal annual instalments until it reaches the age of 10, is acceptable. This method is an attempt to arrive at an acceptable figure for net realisable value where this is less than cost. It is not appropriate in either of the following circumstances:

  • where a better figure is available because the animal is valued at the balance sheet date,
  • where it would give an unreasonable result. For example, in those exceptional cases where the value of an animal increases, or drops at a rate significantly slower than that used in the rule of thumb, because, for example, of very successful progeny, the figure computed using the rule of thumb should be increased to an amount not exceeding cost.


The stud fee or `nomination’ fee paid by the owner of a mare for the services of a particular stallion can be a substantial sum. Unless:

  • the mare has already given birth to the foal, or is known not to have conceived, or has aborted, by the accounting date; or
  • an `adjusting event’ (see BIM33140) occurs - for example, the discovery between the balance sheet date and the date the accounts were finalised of a congenital defect rendering the foal valueless;

the fee paid should be reflected in the balance sheet by one of the following methods:

  • including the fee in a stock valuation of the embryo or foetus of the foal
  • increasing the value of the mare while she is carrying the foal by the amount of the fee
  • carrying forward the fee as a prepayment


When the foal is born the stud fee becomes part of its cost.

  • Foals should normally be included in the stock valuation at cost.