Final answer:
Land rented for agricultural purposes is treated as a rent expense for the entity renting the land and does not appear as an asset on their balance sheet. The landowner retains the asset, and the renting entity expenses rent payments as incurred.
Step-by-step explanation:
When land is owned by a third party and rented to an entity for agricultural purposes, the accounting treatment for the renting entity typically includes recognizing the rent expense on their income statement for the period the rent relates to. The land itself remains an asset of the third party and is not recorded on the balance sheet of the entity renting the land. Instead, the rent payments are expensed as they are incurred and could be subject to operating lease accounting standards if they meet certain criteria.
Agricultural entities may also need to consider the implications of any improvements they make to the land and whether such costs should be capitalized or expensed based on the terms of the lease and accounting standards.