Not every organisation is a trading company with shareholders and a stock market listing. Some manage pension funds. Some grow crops and raise cattle. Some drill for oil and have not yet found any. Some are charities. Some are small private companies that do not need the full weight of international standards. Each has its own accounting problems, and the syllabus covers a set of standards written for them.
This topic covers International Accounting Standard (IAS) 26 on retirement benefit plans, IAS 41 on agriculture, International Financial Reporting Standard (IFRS) 6 on exploration for and evaluation of mineral resources, IFRS 14 on regulatory deferral accounts, the IFRS for Small and Medium-sized Entities (SMEs), and Statement of Accounting Standards (SAS) 32 on not-for-profit organisations. The previous topic covered financial instruments. The next topic starts the group accounts chapters.
In 30 seconds
IAS 26 sets the report of the plan itself (not the employer): plan investments at fair value, and for a defined benefit plan the actuarial present value of promised benefits. IAS 41: living animals and plants are measured at fair value less costs to sell, with changes in profit or loss. Harvested produce is measured the same way once, then becomes inventory.
Bearer plants follow IAS 16. IFRS 6: exploration and evaluation assets may keep the old policy, are classed as tangible or intangible, and are tested for impairment by cash-generating unit. IFRS 14 lets a first-time adopter keep regulatory deferral balances and show them separately. The IFRS for SMEs is a stand-alone, simpler standard for entities without public accountability.
SAS 32 covers private sector not-for-profit organisations: contributions can be restricted, unrestricted or endowments and are recognised by the restricted fund method or the deferral method.
Key terms in plain English
| Term | What it means |
|---|---|
| Retirement benefit plan | A pension arrangement that is a separate reporting entity from the employers |
| Net assets available for benefits | Plan assets less liabilities other than the actuarial present value of promised benefits |
| Vested benefits | Benefits that do not depend on continued employment |
| Biological asset | A living animal or plant |
| Bearer plant | A living plant used to produce crops for more than one period, which is unlikely to be sold (for example oil palms) |
| Agricultural produce | The harvested product of biological assets |
| Exploration and evaluation assets | Costs of searching for and evaluating mineral resources after rights are obtained and before feasibility is shown |
| Regulatory deferral account balance | An amount that would not be an asset or liability under other standards but is deferred because a rate regulator will include it in future prices |
| Public accountability | Having publicly traded securities or holding assets for a broad group of outsiders as a main business |
| Restricted contribution | A contribution that the donor has said must be used for a stated purpose |
| Endowment | A restricted contribution that must be kept permanently, while the income may be used |
Syllabus check
These standards are examinable under syllabus area B. This topic covers:
- the main requirements of IAS 26, IAS 41, IFRS 6 and IFRS 14;
- an overview of the IFRS for SMEs;
- the main requirements of SAS 32.
CAMA 2020 and the sundry standards
The Companies and Allied Matters Act 2020 (CAMA 2020) requires statements that follow IFRS and give a true and fair view.
| Section | What it says | Link to this topic |
|---|---|---|
| s. 377(1) and s. 378 | Directors prepare statements that follow IFRS and give a true and fair view | Agriculture, exploration and regulated activities follow the standards. The IFRS for SMEs applies where the law allows it |
| s. 374(1) | The company keeps accounting records | Valuations of livestock, exploration spending and fund records support the figures |
| s. 385 | The directors’ report covers performance and risk | Commodity, regulatory and reserve risks may need comment |
| s. 404(7) | The audit committee reviews policies and internal control | It can review valuation and capitalisation policies |
IAS 26: retirement benefit plans
IAS 26 covers the reports of the plan. It complements IAS 19, which covers the employer’s cost. It applies to defined contribution and defined benefit plans whether or not the fund is a separate legal entity or has trustees. It does not apply to termination indemnities, long-service leave, health plans or bonus plans, or to government social security schemes.
Plans insured in the name of a participant, where the insurer alone bears the obligation, are outside it.
- Plan investments are carried at fair value. Marketable securities are at market value. If fair value cannot be estimated, the reason is disclosed. Securities with a fixed redemption value bought to match obligations may be carried at redemption-based amounts.
- Defined contribution plan: the report has a statement of net assets available for benefits and a description of the funding policy.
- Defined benefit plan: the report has either (a) a statement showing net assets available for benefits, the actuarial present value of promised benefits (split between vested and non-vested) and the resulting excess or deficit, or (b) a statement of net assets with a note, or reference to an actuarial report, giving the present value of promised benefits. It explains the relationship between the two and the funding policy.
- All plans disclose a statement of changes in net assets (contributions, investment income, benefits paid, expenses, taxes and changes in value of investments), a summary of accounting policies, and a description of the plan. They also disclose any single investment above 5% of net assets or of a class, and any investment in the employer.
The actuarial present value uses current or projected salary levels, and the actuarial assumptions and method are described. If no valuation is up to date, the latest is used and its date is disclosed.
IAS 41: agriculture
IAS 41 applies to biological assets (except bearer plants) and to agricultural produce at the point of harvest, and to related government grants. It does not apply to land (IAS 16 or IAS 40), bearer plants (IAS 16, though the produce growing on them is within IAS 41), intangible assets (IAS 38), government grants on bearer plants (IAS 20) or right-of-use assets for land (IFRS 16). After harvest, produce is inventory under IAS 2.
Examples: sheep and wool, dairy cattle and milk, oil palm trees (a bearer plant) and palm fruit (produce).
- Recognition: the entity controls the asset from a past event, future benefits are probable, and fair value or cost can be measured reliably.
- Measurement: at fair value less costs to sell at initial recognition and at each reporting date. The gain or loss goes to profit or loss. Costs to sell include commissions, levies and transfer taxes.
- Produce at harvest is measured at fair value less costs to sell. That amount becomes its cost for IAS 2.
- Reliability: fair value is presumed to be reliable. The presumption can be rebutted only on initial recognition, if there is no quoted market price and other estimates are clearly unreliable. Then use cost less depreciation and impairment, until fair value becomes reliable.
- Government grants: an unconditional grant on a biological asset at fair value less costs to sell is income when it becomes receivable. A conditional grant is income when the conditions are met. If the asset is at cost, IAS 20 applies.
IFRS 6: exploration and evaluation of mineral resources
Scope. IFRS 6 applies to exploration and evaluation spending after the entity has legal rights to search an area and before technical feasibility and commercial viability are demonstrable. It does not apply to spending before the rights are obtained or after feasibility is shown (development spending follows the Conceptual Framework and IAS 38).
- Accounting policy: an entity may keep its previous policy for recognising and measuring these assets, without applying the IAS 8 hierarchy. It can change policy only if the change makes the information more relevant and no less reliable, or more reliable and no less relevant.
- Initial measurement at cost. The entity sets a policy on which costs are capitalised. Examples: exploration rights, geological and geophysical studies, exploratory drilling, trenching and sampling. Obligations for removal and restoration are recognised under IAS 37.
- Subsequent measurement: the cost model or the revaluation model, consistent with the classification. A revaluation of an intangible needs an active market.
- Presentation: classify as tangible (vehicles, rigs) or intangible (drilling rights). Using a tangible asset to develop an intangible does not change the class, but the use adds to the cost of the intangible.
- Impairment: test when facts suggest that the carrying amount may exceed recoverable amount, allocating the assets to cash-generating units or groups of units. Indicators: the exploration right expires without renewal, no further spending is planned, no commercial quantities are found, activities in the area are discontinued, or the carrying amount is unlikely to be recovered from development or sale. Test for impairment before reclassifying when feasibility is shown.
- Disclosure: the policies, and the amounts of assets, liabilities, income, expense and cash flows. Exploration and evaluation assets are a separate class.
IFRS 14: regulatory deferral accounts
Some governments regulate the prices of goods and services. IFRS 14 lets an entity that is adopting IFRS for the first time, conducts rate-regulated activities, and recognised regulatory deferral account balances under its previous standards, keep them. It must apply the standard to all such balances and in later periods only if it chose to in its first IFRS statements.
Balances are shown separately: separate lines for total debit and total credit balances in the statement of financial position (not split between current and non-current), and the net movement as separate subtotals in profit or loss and other comprehensive income. The disclosures explain the amounts and the timing and uncertainty of cash flows.
IFRS for SMEs
The IFRS for SMEs is a stand-alone standard of 35 sections. It is simpler than full IFRS in five ways: some topics are left out, some accounting choices are removed, recognition and measurement are simplified, there are far fewer disclosures, and the wording is plain.
An SME is an entity that has no public accountability (its debt or equity is not publicly traded and it does not hold assets for outsiders as a main business) and publishes general purpose statements for external users. The law of each country decides who must or may use it.
What it leaves out
Earnings per share, interim reporting, segment reporting and special rules for assets held for sale, because these apply to listed entities.
Main differences from full IFRS (as ICAN teaches them)
| Area | IFRS for SMEs |
|---|---|
| Financial instruments (Sections 11 and 12) | Basic instruments at amortised cost (shares at fair value through profit or loss). Complex ones at fair value through profit or loss. Simplified hedge accounting. Option to apply IFRS 9 instead |
| Intangibles (Section 18) | Cost model only. All research and development expensed. All intangibles amortised (10 years if the life cannot be estimated) |
| Goodwill (Section 19) | Amortised (10 years if the life cannot be estimated). Acquisition costs capitalised |
| Borrowing costs (Section 25) | Expensed. Not capitalised |
| Property, plant and equipment (Section 17) | Residual value, life and depreciation reviewed only if there is an indication of change |
| Investment property (Section 16) | Fair value, unless it cannot be measured without undue cost or effort |
| Leases (Section 20) | Operating and finance leases are distinguished. A lessee recognises an asset and a liability only for finance leases |
| Associates and joint ventures | Cost, equity or fair value model |
| Foreign currency (Section 30) | No recycling of the cumulative translation difference on disposal |
SAS 32: not-for-profit organisations
SAS 32 is a Nigerian standard for private sector not-for-profit organisations. They are run for social, educational, professional, religious, health, charitable or similar purposes, usually without transferable ownership, and the people who give them resources do not expect a financial return. The Financial Reporting Council of Nigeria has said that the standard became effective on 1 July 2011.
Contributions
A contribution is a voluntary, non-reciprocal transfer of cash or assets, or the cancellation of a liability. Government funding is a contribution. There are three types: unrestricted, restricted (the donor stipulates the purpose) and endowment (kept permanently). A voluntary restriction that the organisation sets itself is different because it can change its mind.
Fund accounting and the two methods
In fund accounting, the statements show a self-balancing group of accounts for each fund.
| Contribution | Restricted fund method | Deferral method |
|---|---|---|
| Unrestricted | Revenue of the general fund in the period | Revenue in the period |
| Restricted | Revenue of the matching restricted fund in the period | Deferred contribution first, then revenue as the conditions are met |
| Endowment | Revenue of the endowment fund in the period | Directly in the endowment fund |
If separate funds are reported, either method may be used. If they are not, only the deferral method is allowed.
Financial statements
A statement of accounting policies (a prominent single section), a statement of financial position (net assets, also called fund balances), a statement of activities (the income and expenditure statement), a statement of changes in net assets, a statement of cash flows and notes. General disclosures include the name, the period, a description of purpose and activities, the legal form, and for fund accounting a description of each fund.
The rules in more depth
Why plans report separately
The fund is a separate pool of assets. Members want to know whether it can pay the promised benefits, and the employer’s own statements cannot show that.
Why fair value for livestock
Livestock grows and changes in value every day. Cost does not show the economic progress, and a market price usually exists.
Why exploration assets are tested as a group
An unproved area produces no cash flows of its own, so it is tested with the cash-generating unit it will serve.
Why not-for-profits need two methods
The donor’s restriction, not the giving, is what matters for the user. One method shows what is available. The other matches income with the spending it funds.
Effect on analysis
Fair value gains on herds and crops can be large and unrealised. Analysts look at the share of profit that is cash.
Worked examples
Example 1: a dairy herd. A farm’s dairy herd had a fair value less costs to sell of ₦12,000,000 at the start of the year. During the year it bought animals for ₦1,000,000 and sold animals with a carrying amount of ₦2,000,000. At the year end the herd is worth ₦13,500,000 less costs to sell. Milk with a fair value less costs to sell of ₦900,000 was harvested.
- Gain on the herd.
₦13,500,000 − ₦12,000,000 − ₦1,000,000 + ₦2,000,000 = ₦2,500,000, in profit or loss. - Milk at harvest: Dr inventory ₦900,000; Cr profit or loss (gain on initial recognition of produce) ₦900,000.
- The milk then follows IAS 2, with ₦900,000 as its cost.
Example 2: exploration costs. An oil company pays ₦20m for exploration rights and spends ₦35m on exploratory drilling. It also spends ₦4m on a feasibility study. After the year end, the drilling finds no commercial quantities and the company decides to leave the area.
- Capitalise the rights (₦20m, intangible), the drilling (₦35m, as its policy requires) and the evaluation spending (₦4m).
- The lack of commercial quantities and the decision to leave are impairment indicators. Test the group of assets for the cash-generating unit. If nothing will be recovered, impair the ₦59m.
- Present as an impairment loss in profit or loss. If feasibility had been shown, the assets would be tested for impairment and then reclassified out of exploration and evaluation.
Example 3: a defined benefit plan report. At the report date a plan has investments of ₦8,300,000 at fair value and other liabilities of ₦300,000. The actuarial present value of promised benefits is ₦7,200,000, of which ₦6,000,000 is vested.
- Net assets available for benefits.
₦8,300,000 − ₦300,000 = ₦8,000,000. - Actuarial present value of promised benefits = ₦7,200,000 (vested ₦6,000,000, non-vested ₦1,200,000).
- Excess = ₦8,000,000 − ₦7,200,000 = ₦800,000.
Example 4: restricted and deferral methods. A health charity receives ₦3,000,000 from a donor for an inoculation programme to run over three years. It spends ₦1,000,000 on the programme in year 1.
- Restricted fund method: revenue of ₦3,000,000 is recognised in the restricted fund in year 1. Expenses of ₦1,000,000. Fund balance at the end of year 1 = ₦2,000,000.
- Deferral method: the ₦3,000,000 is a deferred contribution. Revenue of ₦1,000,000 is recognised as the spending occurs. Deferred contribution carried forward = ₦2,000,000. The statement of activities shows a nil surplus.
How to score full marks
- Name the standard and its purpose in the first line.
- For IAS 41, separate biological assets from produce and from bearer plants, and give the fair value less costs to sell workings.
- For IFRS 6, say whether the spending is in scope, the policy applied and the impairment indicators.
- For the IFRS for SMEs, state who qualifies and give two or three specific differences with the full standard.
- For SAS 32, identify the type of contribution and apply both methods.
- For IAS 26, list what the plan report must contain.
- Add the edition or replacement note where the syllabus standard has been updated.
Common mistakes in the exam
- Applying IAS 41 to bearer plants or to land.
- Using cost for livestock when a market price exists.
- Taking the gain on a herd to equity.
- Capitalising development spending as an exploration asset.
- Testing exploration assets one by one.
- Capitalising borrowing costs or research under the IFRS for SMEs.
- Applying IAS 19 rules to the plan’s own report.
- Recognising a restricted contribution as general revenue under the deferral method.
Quick revision
- IAS 26: plan report, investments at fair value, net assets available for benefits, actuarial present value for a defined benefit plan.
- IAS 41: fair value less costs to sell, gains in profit or loss, produce then IAS 2, bearer plants in IAS 16.
- IFRS 6: policy choice, tangible or intangible, impairment by cash-generating unit, scope ends at feasibility.
- IFRS 14: keep and show separately. Replaced by IFRS 20 from 2029.
- IFRS for SMEs: no public accountability, stand-alone. Third edition from 2027.
- SAS 32: private sector. Restricted fund and deferral methods.
- CAMA 2020: ss. 377(1), 378, 374(1), 385, 404(7).
Practice questions
These are original questions written in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one before you open the answer. Full model answers follow the written questions.
Recall check: multiple choice
The real ICAN paper has no multiple-choice section. These questions are for quick recall. The written questions that follow are closer to the exam.
Question 1. Under IAS 41, a biological asset is measured at:
- Cost
- Fair value less costs to sell
- Replacement cost
- Net realisable value
Show the answer
B. Changes go to profit or loss.
Question 2. Oil palm trees are:
- Biological assets under IAS 41
- Bearer plants under IAS 16
- Inventory
- Intangible assets
Show the answer
B. The palm fruit is IAS 41 produce.
Question 3. IFRS 6 applies to spending:
- Before rights are obtained
- After rights and before feasibility is shown
- After feasibility is shown
- On development
Show the answer
B. Development spending is outside it.
Question 4. Exploration and evaluation assets are tested for impairment at the level of:
- Each asset
- Cash-generating units or groups
- The whole company only
- No testing
Show the answer
B. They do not generate separate cash flows.
Question 5. A defined contribution plan report under IAS 26 includes:
- The actuarial present value of benefits
- A statement of net assets available for benefits and the funding policy
- Employer expense
- A cash budget
Show the answer
B. The actuarial value is for defined benefit plans.
Question 6. An SME is an entity that has:
- Fewer than 50 staff
- No public accountability
- No debts
- No audit
Show the answer
B. Law decides who may use the standard.
Question 7. Under the IFRS for SMEs (2015 edition), borrowing costs are:
- Capitalised
- Expensed
- Deferred
- Equity-settled
Show the answer
B. Section 25.
Question 8. A contribution subject to a donor’s stated purpose is:
- Unrestricted
- Restricted
- An endowment only
- Revenue always
Show the answer
B. An endowment must also be kept permanently.
Question 9. Which standard replaced IFRS 14?
- IFRS 15
- IFRS 20
- IFRS 17
- IFRS 9
Show the answer
B. Effective for periods beginning on or after 1 January 2029.
Question 10. Which section of CAMA 2020 requires the statements to follow IFRS?
- Section 378
- Section 400
- Section 405
- Section 409
Show the answer
A. The sundry IFRS standards are part of IFRS.
Written questions
Question 11 (10 marks). (a) Distinguish a biological asset, a bearer plant and agricultural produce, and state how each is measured. (5 marks) (b) Explain how exploration and evaluation spending is recognised and tested for impairment under IFRS 6. (5 marks)
Question 12 (20 marks). (a) A farm’s herd had a fair value less costs to sell of ₦15,000,000 at the start of the year. It bought animals for ₦1,500,000 and sold animals with a carrying amount of ₦2,500,000. At the year end the herd is worth ₦17,000,000 less costs to sell. It also harvested milk worth ₦1,200,000 less costs to sell. Calculate the gain on the herd and give the entries for the milk.
(6 marks) (b) A charity receives ₦6,000,000 for a restricted programme over three years and spends ₦2,000,000 in year 1. Show the amounts under the restricted fund method and the deferral method. (6 marks) (c) At a plan’s report date, investments at fair value are ₦9,000,000, other liabilities ₦400,000 and the actuarial present value of promised benefits is ₦7,800,000 (vested ₦6,500,000). Prepare the key figures for the report.
(4 marks) (d) State the five ways in which the IFRS for SMEs is simpler than full IFRS and who may use it. (4 marks)
Question 13 (10 marks). (a) Explain the scope and presentation requirements of IFRS 14 and say what has replaced it. (4 marks) (b) Explain public accountability and its effect on the use of the IFRS for SMEs. (3 marks) (c) State three indicators of impairment of exploration and evaluation assets. (3 marks)
Model answers
Show the model answer to Question 11
(a) Assets (5 marks). A biological asset is a living animal or plant, measured at fair value less costs to sell with changes in profit or loss. (1.5) A bearer plant is a living plant used to produce crops for more than one period and unlikely to be sold, so it is in IAS 16, not IAS 41.
(1.5) Agricultural produce is the harvested product of biological assets, measured at fair value less costs to sell at harvest and then treated as inventory under IAS 2. (2)
(b) IFRS 6 (5 marks). The entity may keep its policy for recognising and measuring these assets. Sets a policy on which costs are capitalised, such as rights, geological studies and exploratory drilling. (2) They are measured at cost, then under the cost or revaluation model, and classified as tangible or intangible.
(1.5) They are tested for impairment when facts suggest the carrying amount exceeds recoverable amount, allocated to cash-generating units or groups, and tested before reclassification when feasibility is shown. (1.5)
Show the model answer to Question 12
(a) Herd (6 marks).
- Gain = ₦17,000,000 − ₦15,000,000 − ₦1,500,000 + ₦2,500,000 = ₦3,000,000 in profit or loss. (3)
- Milk: Dr inventory ₦1,200,000; Cr profit or loss ₦1,200,000. (2)
- The milk then follows IAS 2 at ₦1,200,000. (1)
(b) Charity (6 marks). Restricted fund method: revenue ₦6,000,000 in the restricted fund in year 1, expense ₦2,000,000, fund balance ₦4,000,000. (3) Deferral method: the ₦6,000,000 is a deferred contribution, revenue of ₦2,000,000 is recognised as spending occurs, and ₦4,000,000 is carried forward as deferred. (3)
(c) Plan report (4 marks).
- Net assets available for benefits.
₦9,000,000 − ₦400,000 = ₦8,600,000. (1.5) - Actuarial present value of promised benefits = ₦7,800,000 (vested ₦6,500,000 and non-vested ₦1,300,000). (1.5)
- Excess = ₦800,000. (1)
(d) IFRS for SMEs (4 marks). Some topics are omitted, some policy options are removed, recognition and measurement are simplified, there are far fewer disclosures, and the wording is plain English. (2.5) It is for entities without public accountability that publish general purpose statements, and the law of each country decides who may or must use it. (1.5)
Show the model answer to Question 13
(a) IFRS 14 (4 marks). It lets a first-time adopter that conducts rate-regulated activities and recognised regulatory deferral balances under its previous standards keep them. (1.5) The balances are shown separately: total debit and total credit balances as separate lines (not split between current and non-current) and net movements as separate subtotals in profit or loss and other comprehensive income. (1.5) IFRS 14 has been replaced by IFRS 20, issued in May 2026 and effective from 1 January 2029. (1)
(b) Public accountability (3 marks). An entity has public accountability if its debt or equity is publicly traded or it holds assets in a fiduciary capacity for a broad group of outsiders as a main business, such as a bank. (1.5) An entity with public accountability cannot use the IFRS for SMEs, and the law decides who may use it. (1.5)
(c) Impairment indicators (3 marks). Any three: the exploration right expires without renewal, no further spending is planned, no commercial quantities are found, activities in the area are discontinued, or the carrying amount is unlikely to be recovered from development or sale. (1 each)
Pathfinder on Sundry standards
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
We found no question on IAS 26, IAS 41, IFRS 6, IFRS 14, the IFRS for SMEs or SAS 32 in the November 2025 or May 2026 Pathfinders. They are still examinable, so use the worked examples for layouts. Note: IFRS 14 has been replaced by IFRS 20 and the IFRS for SMEs has a third edition, as shown in the notes in the sections on those standards.
Revise first: Worked examples
Questions usually ask who may use the standard and three or four differences from full IFRS. See the table in the section on the IFRS for SMEs.
Revise first: IFRS for SMEs
Source: ICAN Pathfinder, Strategic Business Reporting. Diets covered: No question on these standards identified in the November Diet, 2025 or May Diet, 2026 Pathfinders.
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