What is it about?

Agricultural companies often need to report the value of crops and other biological assets in their financial statements. This can be difficult when there is no active market price and when the value of the asset depends on climate, soil, productivity, costs and financial assumptions. This article proposes a method to estimate the fair value of agricultural biological assets in these situations. The proposal combines accounting rules, valuation techniques and agronomic information. It shows how data on expected production, costs, taxes, risk, capital structure and climate conditions can be brought together in one measurement model. In plain terms, the article helps explain how the value of a growing crop can be estimated more reliably when market prices are not directly available.

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Why is it important?

This work is relevant because fair value measurement is required for many biological assets, but agricultural assets are complex and uncertain. Crops grow over time, depend on weather and biological conditions, and may not have a clear market price at the measurement date. The article offers a practical methodological proposal for accountants, auditors, agribusiness managers and researchers who need to deal with this problem. Its main contribution is to show that fair value measurement can become more reliable when accounting information is combined with economic valuation and agronomic evidence.

Perspectives

This publication reflects my interest in accounting problems that cannot be solved only through accounting rules. The measurement of biological assets requires dialogue between accounting, finance and agronomy, because the reported value depends on economic assumptions and on the physical conditions of production. The article proposes a way to make this dialogue operational, with attention to reliability, transparency and the practical challenges faced by agricultural companies.

PhD. Rafael Todescato Cavalheiro
Universidade Federal da Grande Dourados

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This page is a summary of: Fair Value of Biological Assets: An Interdisciplinary Methodological Proposal, Revista de Administração Contemporânea, August 2019, FapUNIFESP (SciELO),
DOI: 10.1590/1982-7849rac2019180254.
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