2017 Financial Guidelines Available!


A new year means new revisions to the FFSC Financial Guidelines for Agriculture. Stay up to date by ordering the 2017 edition of our guidelines document.

Summary of Changes

In this edition of the Farm Financial Standards Council’s Financial Guidelines, there are several important changes to be noted. These changes reflect the latest evolution of the guidelines to be more user-friendly and guided by the continual goal of being as consistent as possible between GAAP and the distinct challenges inherent in agricultural production businesses. The goal of obtaining a more stream-lined, visually appealing, and more concise set of guidelines was largely achieved by reducing verbosity and minor format changes.

Beyond these, the most impactful change affects the Income Statement and subsequent financial analysis ratio calculations and other computations that are derived in part or whole;from the income statement. While the terminology related to some of these calculations has changed, the interpretation of the results has not been affected.

The following summarizes how the Income Statement format has changed in the current edition:

  • Interest expense has been moved out of operating expenses resulting in the subtotal, Income from Operations, which is prior to consideration of interest expense.
  • The prior Income Statement format contained the subtotal Net Farm Income from Operations and was a subtotal that included all operating expenses and only differed from Net Farm Income by the exclusion of gains/losses on capital assets. The term Net Farm Income from Operations has been removed from the guidelines.
  • In the current Income Statement format, Net Farm Income differs from Income from Operations by the exclusion of consideration of interest expense and gains/losses associated with the sale of capital assets.

The following list summarizes the specified effects of the Income Statement format changes:

  • Income Statement format: Interest expense is removed from operating expenses and is listed below Income from Operations subtotal (Formerly Net Farm Income from Operations) as a line item prior to gain/losses on sale of capital assets.
  • Rate of Return on Farm Assets and Operating Profit Margin Ratio computations: In the calculation of these ratios the numerators, Netfarm income from operations + Interest expense, are replaced with the single expression Income from Operations. The interpretation of these ratios remain unchanged.
  • Rate of Return on Farm Equity computation: In the calculation of this ratio the numerator, Net farm income from operations, is replaced with income from Operations -Interest expense. The interpretation of this ratio remains unchanged.
  • EBITDA computation: Net farm income from operations + interest expense replaced with the single expression Income from operations. Intermediate subtotal EBIT removed from the calculation to arrive at EBITDA computation.
  • Capital Debt Repayment Capacity computation: Netfarm income from operations is replaced by Income from Operations. In this calculation, the addition of interest expense on term debt has been replaced with the subtraction of interest expense on current debt to arrive at Capital debt repayment capacity.
  • Income from Operations Ratio computation: In this calculation since Net farm income from operations has been removed from the guidelines; Income from operations less Farm inter.est expense is now used as the numerator. The interpretation of this measure remains unchanged.

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