Fair value measurement for soybean biological assets

What is it about?

Agricultural companies 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 for the asset being measured. This study applies a fair value method to estimate the value of a soybean crop cultivated in Mato Grosso do Sul, Brazil. The article uses discounted cash flow to estimate future economic benefits and brings together accounting, financial and agronomic information. In plain terms, the study shows how the value of a growing crop can be estimated when there is no direct market price. It also shows that fair value measurement in agriculture depends on more than accounting formulas. It requires information about production, expected yields, costs, risks and the biological conditions of the crop.

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Photo by Meredith Petrick on Unsplash

Photo by Meredith Petrick on Unsplash

Why is it important?

This work is relevant because biological assets are difficult to measure when they do not have an active market. The article offers a practical example of how fair value can be estimated in an agricultural setting. This can help accountants, auditors, rural managers and researchers understand the assumptions behind the reported value of crops. The study also contributes to the literature by presenting an empirical application of biological asset valuation, an area where practical examples are still limited.

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