1. The financial management of farming businesses
1.1. Introduction
1.1.1. Introduction
1.1.2. Capital intensity and the price of UK farmland
1.1.3. Agricultural production cycles
1.1.4. Agricultural policy and government support
1.2. Agricultural production cycles
1.2.1. Agricultural production cycles
1.2.2. Arable production cycles
1.2.3. Livestock production cycles
1.2.4. Working capital demand and cash flow forecasting
1.2.5. Expansion and new enterprises
1.3. Financing
1.3.1. Financing
1.3.2. Net assets
1.3.3. Sources of financing
1.3.4. Maturity matching
1.3.5. Types of security for debt financing
1.3.6. Sources of debt financing
1.3.7. Long-term bank loans (agricultural mortgages)
1.3.8. Medium-term debt
1.3.9. Short-term debt
1.4. Management accounting
1.4.1. Financial accounts
1.4.2. Management accounts
1.4.3. Agricultural production cycles
1.4.4. The basis of preparation of farming management accounts
1.4.5. Format and content of management accounts
1.4.6. Preparing monthly or quarterly management information
1.4.7. Preparing management accounts for farms adopting fair value financial reporting for biological assets and agricultural produce (IFRS and FRS 102 Fair value model)
1.5. Business planning, budgeting, and reforecasting
1.5.1. Business planning, budgeting, and reforecasting
1.5.2. Business plans
1.5.3. The requirement for effective business planning in a changing UK farming sector
1.5.4. The advantages of setting farm budgets
1.5.5. Format and content of farm budgets
1.5.6. Monitoring actual performance against budget
1.5.7. Reforecasting and rolling budgets
1.6. Key performance indicators, metrics and benchmarking
1.6.1. Key performance indicators, metrics and benchmarking
1.6.2. Key Performance Indicators
1.6.3. Metrics
1.6.4. Time series analysis
1.6.5. Sector-specific metrics
1.6.6. Benchmarking
1.6.7. DEFRA Farm Business Survey
1.6.8. Return on capital / Return on tenants capital
1.6.9. Enterprise-level gross margin analysis (per hectare and / or per unit of production)
1.6.10. Farm-level profitability analysis (per hectare)
1.6.11. Balance sheet analysis
1.6.12. Standardising management accounts information for benchmarking purposes
2. About the authors
2.1. About the authors
3. An introduction to UK agriculture
3.1. Understanding a changing UK farming sector
3.1.1. Understanding a changing UK farming sector
3.1.2. Post-Brexit UK agricultural policy
3.1.3. Climate change and environmental policy
3.1.4. Global macro-environmental factors
3.1.5. UK macro-environmental factors
3.2. UK agricultural policy
3.2.1. UK agricultural policy
3.2.2. Brexit and the withdrawal from the EU Common Agricultural Policy (CAP)
3.2.3. The Agriculture Act 2020
3.2.4. Environmental Land Management Scheme (ELMS)
3.3. Climate change
3.3.1. Climate change
3.3.2. UK agriculture’s greenhouse gas (GHG) emissions
3.3.3. UK government’s GHG emission commitments
3.3.4. NFU Achieving Net Zero
3.3.5. Carbon sequestration and carbon trading
3.4. Other environmental policy areas
3.4.1. Other environmental policy areas
3.4.2. The Environment Bill 2019–2020
3.4.3. Biodiversity net gain
3.4.4. Agrochemicals
3.4.5. Water pollution and nitrate vulnerable zones
3.5. Animal welfare and disease control
3.5.1. Animal welfare and disease control
3.5.2. Animal welfare
3.5.3. Disease control
3.6. Organic production
3.6.1. Organic production
3.6.2. Definition of organic production
3.6.3. Scale of UK organic production by sector
3.7. Regenerative agriculture
3.8. Fourth agricultural revolution
3.8.1. Fourth agricultural revolution
3.8.2. Artificial intelligence and robotics
3.8.3. Gene editing and gene modification
3.8.4. Vertical farming
3.8.5. Synthetic protein
3.9. Farm workers
3.9.1. Farm workers
3.9.2. National Minimum and Living Wage and the application of IR35
3.9.3. Post-Brexit Seasonal Workers Scheme
3.9.4. Gangmasters Licencing Scheme
3.10. Farming co-operatives and farm assurance schemes
3.10.1. Farming co-operatives and farm assurance schemes
3.10.2. Farm co-operatives and collaborative working
3.10.3. Farm assurance schemes
3.11. Sector analysis – Arable
3.11.1. Sector analysis – Arable
3.11.2. UK land use, yields, KPIs, and benchmarking
3.11.3. Typical level of sector profitability and the effect of BPS withdrawal
3.11.4. Current issues and future developments
3.12. Sector analysis – Horticulture
3.12.1. Sector analysis – Horticulture
3.12.2. UK land use, yields, KPIs, and benchmarking
3.12.3. Typical level of sector profitability and the effect of BPS withdrawal
3.12.4. Current issues and future developments
3.13. Sector analysis – Dairy
3.13.1. Sector analysis – Dairy
3.13.2. UK land use, yields, KPIs, and benchmarking
3.13.3. Typical level of sector profitability and the effect of BPS withdrawal
3.13.4. Current issues and future developments
3.14. Sector analysis – Beef and sheep
3.14.1. Sector analysis – Beef and sheep
3.14.2. UK land use, yields, KPIs, and benchmarking
3.14.3. Typical level of sector profitability and the effect of BPS withdrawal
3.14.4. Current issues and future developments
3.15. Sector analysis – Poultry
3.15.1. Sector analysis – Poultry
3.15.2. UK land use, yields, KPIs, and benchmarking
3.15.3. Typical level of sector profitability and the effect of BPS withdrawal
3.15.4. Current issues and future developments
3.16. Alternative Enterprises
3.16.1. Alternative Enterprises
3.16.2. Historic farm diversification
3.16.3. Alternative energy
3.16.4. Biodiversity net gain
3.16.5. Carbon sequestration and carbon trading
3.16.6. Parallel funding
3.16.7. A new farming business model
4. Farming business structures and legal forms
4.1. Introduction
4.2. Sole trader farming operations
4.3. Partnerships
4.3.1. Partnerships
4.3.2. Land ownership
4.3.3. Partnership agreements
4.3.4. Land Capital Accounts
4.3.5. Other commercial considerations
4.3.6. Family succession planning
4.4. Limited Partnerships
4.5. Limited companies
4.5.1. Limited companies
4.5.2. Incorporation
4.5.3. Limited liability
4.5.4. Reporting requirements
4.5.5. Taxation
4.5.6. Transfer of ownership and control
4.5.7. Partial incorporation
4.6. Limited liability partnerships
4.6.1. Limited liability partnerships
4.6.2. Transfer of assets
4.6.3. Limited liability
4.6.4. Reporting requirements
4.6.5. Taxation
4.7. Unlimited companies
5. Financial reporting and generally accepted accounting practice
5.1. Introduction
5.2. UK financial reporting
5.2.1. UK financial reporting
5.2.2. Companies Act 2006 requirements
5.2.3. Generally accepted accounting practice in the UK (UK GAAP)
5.2.4. International Financial Reporting Standards (IFRS)
5.2.5. Limited liability partnerships (LLPs)
5.2.6. Unincorporated businesses
5.3. FRS 102 Section 34 Specialised Activities: Agriculture
5.3.1. FRS 102 Section 34 Specialised Activities: Agriculture
5.3.2. Objectives and scope
5.3.3. Valuation (measurement) – Fair value model or cost model
5.3.4. Fair value model
5.3.5. Cost model
5.3.6. Key definitions (FRS 102, Appendix 2)
5.4. Farm stocks (FRS 102 Section 34 Agriculture / Section 13 Inventories)
5.4.1. Farm stocks (FRS 102 Section 34 Agriculture / Section 13 Inventories)
5.4.2. Farm stock valuation for management accounting
5.4.3. Farms stock valuation for financial reporting
5.4.4. Farm stock valuation for taxation purposes
5.4.5. The application of BIM 55410 to farm businesses adopting the cost model
5.4.6. Production costs (application of BIM 55410)
5.4.7. Deemed costs (application of BIM 55410)
5.4.8. Net realisable value
5.5. Farming grants and subsidies (FRS 102 Section 24 Government Grants)
5.5.1. Farming grants and subsidies (FRS 102 Section 24 Government Grants)
5.5.2. Accounting treatment
5.5.3. EU Common Agricultural Policy (CAP)
5.5.4. Direct income support (‘pillar 1-type’) payments – Basic Payment Scheme
5.5.5. Rural development (‘pillar 2 type’) payments
5.5.6. The future of agricultural financial assistance in the UK
5.5.7. The Agriculture Act 2020
5.5.8. The future of direct income support in England
5.5.9. The future of rural development support in England
5.5.10. The Environmental Land Management Scheme (ELMS)
5.5.11. The Farming Investment Fund
5.6. Farmland (FRS 102 Section 17 Property, Plant and Equipment)
5.6.1. Farmland (FRS 102 Section 17 Property, Plant and Equipment)
5.6.2. Carrying values
5.6.3. Land capital accounts (partnerships only)
5.7. Farm machinery (FRS 102 Section 17 Property, Plant and Equipment / Section 20 Leases)
5.7.1. Farm machinery (FRS 102 Section 17 Property, Plant and Equipment / Section 20 Leases)
5.7.2. Outright purchase
5.7.3. Grants
5.7.4. Hire purchase / Conditional sale
5.7.5. Finance leases
5.7.6. Operating leases
5.7.7. Depreciation rates
5.7.8. Fixed asset register
5.8. Investment properties (FRS 102 Section 16 Investment Property)
5.9. Commodity price hedging and derivative financial instruments (FRS 102 Section 12 Other Financial Instrument Issues)
5.10. Sales to agricultural co-operatives (FRS 102 Section 23 Revenue)
5.10.1. Sales to agricultural co-operatives (FRS 102 Section 23 Revenue)
5.10.2. Transactions where the co-operative acts as principle
5.10.3. Transactions where the co-operative acts as an agent
5.11. Collaborative farming arrangements and joint ventures
5.11.1. Collaborative farming arrangements and joint ventures
5.11.2. Share farming
5.11.3. Contract farming
5.11.4. Joint ventures
5.12. The herd basis
5.12.1. The herd basis
5.12.2. Initial cost of herd (BIM 55530)
5.12.3. Herd replacements (BIM 55535)
5.12.4. Disposal of whole or substantial part of herd without replacements (BIM 55540)
5.12.5. Acquisition of new animals following a major disposal (BIM 55545)
5.12.6. Minor disposal from the herd without replacement (BIM 55550)
5.13. The application of IFRS in agriculture
5.13.1. The application of IFRS in agriculture
5.13.2. The IFRS framework
5.13.3. IAS 41 Agriculture
6. Auditing and reporting
6.1. Overview of audit requirements for agricultural businesses
6.1.1. Overview of audit requirements for agricultural businesses
6.1.2. The statutory requirement for audit
6.1.3. Other circumstances when an audit may be required
6.1.4. Non-audit services
6.1.5. Communicating with the client and managing client expectations
6.2. Risk assessment and preliminary work
6.2.1. The role of the auditor
6.2.2. Initial assessments and preliminary planning
6.2.3. Going concern basis and the withdrawal of direct income support (basic payment scheme) payments
6.2.4. Farm records
6.2.5. Permanent information
6.3. Audit approach
6.3.1. Audit approach
6.3.2. The role of the audit partner / responsible individual
6.3.3. Quality of audit evidence
6.3.4. Analytical procedures
6.4. Yields and output analysis
6.4.1. Yields and output analysis
6.4.2. Cereals
6.4.3. Potatoes
6.4.4. Sugar beet
6.4.5. Peas, beans, oilseed rape and herbage seed
6.4.6. Livestock reconciliation
6.5. Audit areas – practical guidance
6.5.1. Variable costs
6.5.2. Farmland
6.5.3. Farm machinery and other fixed assets
6.5.4. Stocks
6.5.5. Debtors
6.5.6. Bank and cash
6.5.7. Creditors
6.5.8. Grants and subsidies
6.5.9. Derivative financial instruments
6.5.10. Collaborative farming arrangements and joint ventures
6.5.11. Trade investments
6.5.12. Use of an expert