Crops, Harvest, Inventory and Work in Progress in an Agribusiness Sale: What Is Included in the Deal

01

Establish what is being acquired

Acquiring shares in a company is different from purchasing its grain, materials or other assets directly. A change of shareholder does not itself transfer company-owned property into the shareholder’s direct ownership. The company retains its assets and liabilities; the buyer reviews their scope, restrictions and impact on the share purchase price.

An asset transaction needs an agreed schedule, ownership evidence, delivery arrangements and payment terms. Review required consents, contract-transfer restrictions and related liabilities separately. Do not assume that land-use rights or storage contracts transfer automatically.

If the seller intends to remove grain or materials before completion of a share sale, document the arrangement and review the legal, tax and financial consequences. A verbal statement that “the seller keeps the harvest” is insufficient.

See the broader guide to selling an agribusiness in Ukraine.

02

A seasonal-asset review matrix

This is a starting point for a verification register, not a universal valuation method. A category does not automatically justify an extra payment. Assign an owner to each review item and link the supporting records.

03

Crops and production costs may represent the same value

Adding both a full crop valuation and every cost already embodied in that crop can double count the same value. Harvested produce and all costs of growing it should not automatically be treated as independent amounts either.

For businesses using Ukrainian national accounting standards, National Standard 30 addresses biological assets and initial recognition of agricultural produce. After initial recognition, produce is accounted for under National Standard 9. The classification of particular crops and production expenditure depends on the applicable rules and accounting policy. “All standing crops are work in progress” is not a reliable universal statement.

Businesses reporting under IFRS require a separate assessment under their applicable framework. Under either framework, book value is not a ready-made transaction price. Ask the accountant or financial adviser to reconcile the asset register, accounts and contractual calculation.

04

Set the cut-off date and track movements to completion

The cut-off is the agreed point to which balances and transactions are attributed for a particular calculation. It may differ from signing. The transfer of title, risk, control and economic benefit should also be analysed separately.

Between signing and completion, the business may harvest crops, sell grain, buy fuel and pay contractors. Agree permitted operations, notification of material changes, supporting evidence and the process for updating balances.

A movement schedule should reconcile opening stock, additions, consumption or sales, transfers and closing stock. Show returns, losses, conditioning and accounting corrections separately. Where a physical count precedes the calculation date, reconcile all movements between the two dates.

05

Review ownership, existence and accessibility separately

Under Ukraine’s Accounting and Financial Reporting Law, primary documents underpin transaction accounting and inventory procedures verify existence, condition and valuation. A ledger entry alone does not resolve every ownership or disposal question.

Match contracts, receipts, stock movements, settlements and physical checks. Separate company-owned stock at its own premises, company-owned stock held elsewhere and third-party property held by the business. Do not conceal discrepancies inside a single “warehouse balance” figure.

For external storage, request confirmation at the agreed date covering quantity, quality, ownership or entitlement, release documents, accrued services and disputes. Review storage arrangements under the contract and applicable Civil Code provisions. Where special warehouse documents exist, have Ukrainian counsel review their legal regime and holders’ rights.

06

Make the inventory review reproducible

Agree scope, date, participants, units and methods for measuring quantity and quality. Involve an agronomist, laboratory or technical specialist where necessary. An undated statement that stock is “in good condition” is a weak basis for a price calculation.

Document results, items that could not be inspected and discrepancies. For shortages, excess quantities or deterioration, identify the cause, evidence, responsible person and proposed treatment. Check statutory accounting inventory procedures against Regulation 879. A buyer’s additional review may have an agreed scope; do not describe every share acquisition as automatically triggering mandatory inventory procedures.

07

Security interests and third-party rights survive an inspection

The presence of grain does not prove that it can be freely disposed of. Request security documents, relevant registry information, financing terms and creditor consents where required. Review supply contracts, customer prepayments, storage arrangements and disputes affecting specific lots.

For each problem, define an action, completion evidence and a responsible party. A seller’s promise does not replace the necessary release, repayment or consent. See selling an agribusiness with debt, collateral or litigation.

08

Prevent double counting in the purchase price

Enterprise value commonly describes the value of the operating business before agreed financing and other adjustments. Establish what normal level of working capital that value assumes. The agreed definition may include usable inventory, operating receivables, advances and trade payables, but its exact scope is transaction-specific.

Define debt-like items and excluded assets separately. These are contractual classifications for the price mechanism, not automatic changes to accounting labels.

A hypothetical example without amounts: if grain already forms part of actual working capital, adding another payment for the same grain risks double counting. Once a supplier advance has been settled by delivery, do not count both the outstanding advance and all the delivered goods. If harvest is removed before completion, assess the effects on stock, cash, liabilities and the agreed price.

Use one reconciliation schedule: each material item needs a defined place in the perimeter, accounts and price calculation. Agree valuation rules, the seasonal target, calculation responsibilities and dispute procedures. Other price mechanisms may operate differently. Read more in preparing agribusiness financials for sale.

09

Records to prepare for review

1. Group structure and legal entities in the transaction.
2. Seasonal-asset register with owner, location, units and custodian.
3. Field, crop and work-stage maps linked to land-use evidence.
4. Accounting policy and the applicable reporting framework.
5. Trial balances and relevant account breakdowns.
6. Purchase, production, receipt and consumption records.
7. Inventory reports, measurements and discrepancy schedules.
8. Quality certificates, laboratory results and impaired-stock details.
9. Storage contracts, warehouse documents and external confirmations.
10. Movement reconciliation from the inventory date to the calculation date.
11. Security, restrictions, disputes and required-consent schedule.
12. Register of third-party property held by the business.
13. Advances register and confirmations of delivery or repayment.
14. Draft perimeter, exclusions and price-adjustment mapping.

Provide access to sensitive documents in stages. The seller’s document checklist covers the wider evidence package.

10

Seller’s checklist

1. Identify legal entities, assets and exclusions.
2. Assign responsibility for fields, warehouses, accounts and contracts.
3. Reconcile own and third-party stock at every location.
4. Substantiate rights and primary records for material items.
5. Disclose quality issues, losses, expiry and unusable balances.
6. Map security interests, disputes and storage-release conditions.
7. Agree verification dates, methods and movements to completion.
8. Reconcile crops, production expenditure, stock and advances without duplication.
9. Allocate items between working capital, debt and exclusions consistently.
10. Refer disputed matters to financial, legal and tax advisers.

11

Buyer’s checklist

1. Establish whether the purchase concerns shares or specified assets.
2. Understand the stock assumptions in the base price.
3. Match the register to documents and physical verification.
4. Obtain external-storage and key-counterparty confirmations.
5. Review quality, accessibility and necessary conditioning costs.
6. Separate third-party property and rights.
7. Track movements between inspection, signing and completion.
8. Agree a working-capital target that reflects the season.
9. Identify double counting and inconsistent debt-like classifications.
10. Specify completion evidence, responsible parties and dispute procedures.

See also 15 questions before buying an agribusiness in Ukraine.