Value relevance of biological assets under IFRS

Rute Gonçalves , Patrícia Lopes, Russell Craig

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    The aim of this paper is to examine the value relevance of fair value accounting of biological assets under IAS 41 - Agriculture - using 389 firm-year observations of listed firms in 27 countries worldwide that had adopted IFRS, for the period between 2011 and 2013. In order to operationalize it as the ability of book value to explain market equity value, this study adjusts the original Ohlson model. The results confirm that recognized biological assets are value relevant at fair value and they are more value relevant in firms that exhibit higher disclosure levels. The same results were obtained when this analysis was conducted for bearer biological assets, but when it was applied to consumable biological assets, the results suggest that investors do not value recognized biological assets in firms that exhibit higher disclosure levels. Bearing in mind the current adjustments to IAS 41, according to which firms will be permitted to choose either the cost or the revaluation models for mature bearer plants under IAS 16 - Property, plant and equipment - for annual periods beginning on/or after 1 January 2016, this paper seeks to help standard setters to better understand the market valuation implications of this standard.
    Original languageEnglish
    Pages (from-to)118-126
    JournalJournal of International Accounting, Auditing and Taxation
    Early online date19 Oct 2017
    Publication statusPublished - Oct 2017


    • biological assets
    • fair value accounting
    • financial reporting
    • disclosure index
    • regulation


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