Will the amendments to the IAS 16 and IAS 41 influence the value of biological assets?

DOI:10.17221/314/2015-AGRICECONCitation:Bohusova H., Svoboda P. (2017): Will the amendments to the IAS 16 and IAS 41 influence the value of biological assets?. Agric. Econ. – Czech, 63: 53-64.
download PDF

The aim of the paper is the evaluation of the impact of the new amendments to the IAS 16 and IAS 41 – Agriculture: Bearer Plants on the financial reporting in agriculture. The paper is based on the comparison of the current treatments for biological assets in a form of bearer plants measurement using the IFRS13 methodology and the treatments of the amendments to the IAS 16 and IAS 41. Statistical data regarding the selected bearer plant were used for the quantification. The orchard of fruit trees was considered as a suitable representative of bearer plants. As it is clear from the results of the research, the measurement at fair value using the DCF method is based on the estimation which requires a relatively large source of input data for this estimation over the useful life of bearer plants. On the other hand, the effect on the value of the assets could be controversial and the effect on the profit or loss during the useful life could be volatile. Although the objective of the fair value measurement is to achieve a true and fair view, in this case, the fulfilment of this objective is at least controversial, since the biological assets in the form of bearer plants cannot be separately traded.

Argilés Josep Maria, Slof Eric John (2001): New opportunities for farm accounting. European Accounting Review, 10, 361-383 doi:10.1080/09638180126640
Argilés Josep M., Garcia-Blandon Josep, Monllau Teresa (2011): Fair value versus historical cost-based valuation for biological assets: predictability of financial information. Revista de Contabilidad, 14, 87-113 doi:10.1016/S1138-4891(11)70029-2
Barth M.E. (2004): Fair values and financial statement volatility. The Market Discipline across Countries and Industries. MIT Press, Cambridge.
Bohušová H., Svoboda P., Nerudová D. (2012): Biological assets reporting: Is the increase in value caused by the biological transformation revenue? Agricultural Economics – Czech, 58: 520–532.
Booth P., Walker R. (2003): Valuation of SGARAs in the wine industry: time for sober reflection. Australian Accounting Review, 13: 52–60.
Damian M.I., Manoiu S.M., Bonaci C.B., Strouhal J. (2014): Bearer plants: Stakeholders’ view on the appropriate measurement model. Journal of Accounting and Management Information Systems, 13: 719–738.
Dowling Carlin, Godfrey Professor.Jayne (2001): AASB 1037 Sows the Seeds of Change: A Survey of SGARA Measurement Methods. Australian Accounting Review, 11, 45-51 doi:10.1111/j.1835-2561.2001.tb00179.x
Dvorakova D. (2006): Application of fair value measurement model in IAS 41 – relation between fair value measurement model and income statement structure. European Financial and Accounting Journal, 2: 49–70.
Elad Ch. (2004): Fair value accounting in the agricultural sector: some implications for international accounting harmonization, European Accounting Review, 13: 621–641.
Elad Ch., Herbohn K. (2011). Implementing Fair Value Accounting in the Agricultural Sector. Institute of Chartered Accountants of Scotland. Edinburgh.
Fang I.L. (2015): Impact of revised FRS 41 & FRS 16 on planters. Commodities, 8/2015. Available on https://brokingrfs.cimb.com/ynnNwHNxn_yOkFkQVcsR8PMfCJFrdL2MvxSwOAbss8MKdIbULpfiQcD9E4RT8GJc4m2v_3p5oz41.pdf
Foo Y.F (2006): Fair Value Accounting for Local Farm Sector, CPA Australia, ProQuest Information and Leaning Company. New Straits Times, 3.
Gonçalves R., Lopes P. (2015): Accounting in Agriculture: Measurement practices of listed firms, FEP Working Papers, University of Porto. Available on http://www.fep.up.pt/investigacao/workingpapers/wp557.pdf
Herbohn K.F., Herbohn J. (2006): Accounting for SGARAs: A stock take of practice before compliance with AASB 141 Agriculture. Australian Accounting Review, 16: 63–77.
HERBOHN KATHLEEN F., PETERSON RONALD, HERBOHN JOHN L. (1998): Accounting for Forestry Assets: Current Practice and future Directions. Australian Accounting Review, 8, 54-66 doi:10.1111/j.1835-2561.1998.tb00080.x
Hinke J., Stárová M. (2014): The fair value model for the measurement of biological assets and agricultural produce in the Czech Republic. Procedia Economics and Finance, 12. Available on http://ac.els-cdn.com/S2212567114003384/1-s2.0-S2212567114003384-main.pdf?_tid=132b54a2-5d13-11e5-ad98-00000aacb35d&acdnat=1442477401_4a4d14404bed6548ac9b718450cfae05
Institute of Agricultural Economics and Information (2002–2014): Situační a výhledová zpráva – ovoce (2002–2014). Available on http://eagri.cz/public/web/mze/zemedelstvi/rostlinne-komodity/ovoce-a-zelenina/situacni-a-vyhledove-zpravy-ovoce/
IASC (2000): International Accounting Standard (IAS) 41 – Agriculture. Available on http://www.ifrs.org
IASB (2011): International Financial Reporting Standard (IFRS) 13 – Fair value measurement. Available onhttp://www.ifrs.org
IASB (2013): Amendments to IAS 16 and IAS 41 – Bearer Plants. Available on http://www.ifrs.org
Kavka M. (2004): Normativy pro zemědělskou a potravinářskou výrobu. Ústav zemědělských a potravinářských informací, Praha.
Kouřilová J., Sedláček J. (2014): Environmental accounting and the FADN as a basis of model for detecting the material flow cost accounting, Agricultural Economics – Czech, 60: 420–429.
KPMG (2011): First impression: Fair value measurement. Available on https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/first-impressions/Documents/first-impressions-fair-value-measurement.pdf
Kudová Dagmar (): The atractiveness of apple production in the Czech Republic. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 54, 47-60 doi:10.11118/actaun200654030047
LIANG PIERRE JINGHONG, WEN XIAOYAN (2007): Accounting Measurement Basis, Market Mispricing, and Firm Investment Efficiency. Journal of Accounting Research, 45, 155-197 doi:10.1111/j.1475-679X.2007.00227.x
Lokoč R., Přasličák M., Dovala O., Kubesa S. (2013): Pěstování ovocných stromů a keřů. Available on http://ovoce.hlucinsko.eu/4web/soubory/vzdelavaci-material-web.pdf
Marsh T., Fischer M. (2013): Biological assets: financial recognition and reporting using US and international accounting guidance. Journal of Accounting and Finance, 13: 57–74.
Penttinen M., Lutakka A., Merilainen H., Salminen O. (2004). IAS fair value and forest evaluation on farm forestry. Scandian Forest Economics. 40: 67–80.
Ronen Joshua (2008): To Fair Value or Not to Fair Value: A Broader Perspective. Abacus, 44, 181-208 doi:10.1111/j.1467-6281.2008.00257.x
Silva Ricardo, Nardi Paula, Ribeiro Maisa (2015): Earnings Management and Valuation of Biological Assets. Brazilian Business Review, 12, 1-26 doi:10.15728/bbr.2015.12.4.1
Thurrun Bhakir M.I. (2010): Applying IAS 41 in Malaysia. Accountants Today. Available on http://www.mia.org.my/at/at/2010/03/06.pdf
download PDF

© 2017 Czech Academy of Agricultural Sciences