There are not many accounting articles specially for rice millers. Paddy rice milled into head rice, broken rice and by-products i.e., bran and husk; technically, joint products and by-products. So how to allocate those costs under CIFRS for SMEs?

Well, an entity shall allocate them between the products on a rational and consistent basis. The allocation may be based, for example, on the relative sales value of each product either at the stage in the production process when the products become separately identifiable or at the completion of production.

Most by-products, by their nature, are immaterial. When this is the case, the entity shall measure them at selling price less costs to complete and sell and deduct this amount from the cost of the main product. As a result, the carrying amount of the main product is not materially different from its cost.

For examples: The total cost (i.e., including direct costs and the allocation of overheads) of a production run is $100,000:

Head rice: 100 MT (sale value = $100,000)

Broken rice: 150 MT (sale value = $50,000)

By-products: 50 MT (sale value = $2,000)

Entity may have their costs, using relative sale value, at:

Head rice: $653.33 per metric ton

Boken rice: $217.78 per metric ton

By-products: $40 per metric ton (assume it’s not material)

This is just an illustrative example. In real practices, additional facts and circumstance need to take into account.