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105 Cards in this Set
- Front
- Back
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2 asset manangement |
Forest Inventory Asset Valuation |
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Accounting helps in maintaining accurate records of the forest's inventory. |
Forest Inventory |
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Valuation techniques assist in determining the market value of forest assets. |
Asset valuation |
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2 Control and Budgeting: |
Operational Cost Capital Expenditure |
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Accounting helps track operational costs associated with forestry activities |
Operational Costs |
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Forestry companies often make significant capital investments in equipment and infrastructure. |
Capital expenditure |
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2 revenue recognition |
Timber Sales Carbon credits and ecosystem services |
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Accounting ensures accurate recognition of revenue from timber sales. |
Timber Sales |
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Some forests generate revenue through carbon sequestration or providing ecosystem services. |
Carbon credits and ecosystem services |
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2 compliance and reporting |
Regulatory compliance Financial reporting |
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Forestry operations are subject to various regulations and environmental standards. |
Regulatory compliance |
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Accurate financial reporting is essential for stakeholders, including investors, government agencies, and the public. |
Financial reporting |
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2 decision report |
Strategic planning Risk management |
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Valuation of forestry assets and financial data generated through accounting processes contribute to ________. |
Strategic planning |
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Valuation models and accounting information help in identifying and managing ________ associated with forestry activities. |
Risk management |
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Famously known as the “Language of business”. -Through the financial statement, the end-product reports in accounting, it deliver information to different users. |
Accounting |
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is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions, in making reasoned choices among alternative courses of action. |
Accounting |
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Types of accounting |
Financial Accounting Managerial Accounting Cost Accounting Auditing Tax Accounting Accounting System Fiduciary Accounting Forensic Accounting |
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Fundamentals and Elements of Accounting |
Asset Liability Capital Income Expenses Revenue Profit Loss Losses Fixed asset Current asset Creditors |
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Anything tangible or intangible that is capable of being owned or controlled to produce value and that can be converted into cash. |
Asset |
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Amount Payable to providers of goods and Services (Creditors) and Providers of Capital (Owners). |
Liability |
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Also known as net assets or equity, capital refers to what is left to the owners after all liabilities are settled. |
Capital |
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Capital is affected by the following |
1. Initial and additional contributions of owner/s (investments), 2. Withdrawals made by owner/s (dividends for corporations), 3. Income, and 4. Expenses |
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refers to an increase in economic benefit during the accounting period in the form of an increase in asset or a decrease in liability that results in increase in equity, other than contribution from owners |
Income |
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are decreases in economic benefit during the accounting period in the form of a decrease in asset or an increase in liability that result in decrease in equity, other than distribution to owners |
Expenses |
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is the income that a company receives from its normal business activities, usually from the sale of goods and services to customers. |
Revenue |
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A financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity. PROFIT= TOTAL REVENUE – TOTAL EXPENSES |
Profit |
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is a decrease in net income that is outside the normal operations of the business. |
Loss |
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can result from a number of activities such as; sale of an asset for less than its carrying amount, the write-down of assets, or a loss from lawsuits. Total Expenses >Total Revenue =Loss |
Losses |
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Amount Invested in Long Term Assets which is not intended to be sold within a Year. They are long-term, tangible assets. |
Fixed asset |
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Amount invested in Short Term Assets which is intended and rotated to earn Revenue. |
Current assets |
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Person who provide Money or Goods on Credit to the Business (Supplier) |
Creditors |
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Goods or Money Provided / sold on Credit by the Business (Customers) |
Deptors |
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Classification of accounting |
Personal account Real account Nominal account |
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Individuals, firms, limited companies, Local authorities, local authorities, association. Debit “the Receiver” Credit “the Giver” |
Personal account |
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Properties, assets Debit “What comes in” Credit “What goes out” |
Real account |
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expenses – losses & income – gains Debit “All the expenses & losses” Credit “All Income & gains” |
Nominal account |
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Financial Statement |
1. Statement of Comprehensive Income 2. Statement of Changes in Capital 3. Statement of Financial Position 4. Statement of Cash Flows 5. Note to Financial Statement |
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Shows the results of operations of an entity over a particular period of time. |
Statement of the comprehensive income |
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shows the balance of the capital account at the beginning of the period, the changes that occurred during the period, and the ending balance as a result of such changes. Capital is affected by contributions and withdrawals of owners, income, and expenses. |
Statement of changes in capital |
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A Balance Sheet presents an entity's assets, liabilities, and capital as of a given point in time. This report shows the entity's financial position and condition, hence, also called Statement of Financial Position. |
Statement of financial position |
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presents the beginning balance of cash, the changes that occurred during the period, and the cash balance at the end of the period as a result of the changes. |
Statement of cash flows |
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provide information in addition to those presented in the Balance Sheet, Income Statement, Statement of Changes in Equity, and Cash Flow Statement. |
Note to financial statement |
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It is branch of applied economics is mainly focused on sustainable yield timber management, resource extraction and commodity production, excluding a wide range of forest values.
The forest is viewed as a storable renewable resource and forestry as an investment with long rotation (production) periods and easily measurable stock growth.
The task of forestry economics is to help determine a level and pattern of forest use which maximizes the present value of forest rent |
Forest economics |
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Characteristics of forest |
Extensive, visible and "open" resources Renewable resources Production capacity Multiple useForests are both ecosystems and production systems Geographical and biological varieties Long rotation times |
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is a long term production cyclic process. |
Forest cultivation |
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Time taken to complete one production cycle is determined by following factors: |
Timber species Land and soil type Geo- diversification Level of Management Plant density |
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Importance of forest |
Economic benefits- wood products, non-timber forest product Social benefits- domestic use, recreation, aesthetic and spiritual Ecological benefits- climate change, habitat and biodiversity, water and soil improvement |
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Direct and Indirect Benefits from the Forests |
Direct Indirect |
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Direct benefits |
Timber Non Wood Forest Products (Medicinal plants, fodder, fuel wood, gum, resin, fruits, flowers, roots, bark, leaves, fiber etc.) |
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Soil and water conservation, pollution control, recreation, education, research, increase rainfall, temperature control, ground water recharging, flood control, disease regulation, nutrient cycling, water cycling and habitat for wildlife etc. |
Indirect benefits |
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Soil and water conservation, pollution control, recreation, education, research, increase rainfall, temperature control, ground water recharging, flood control, disease regulation, nutrient cycling, water cycling and habitat for wildlife etc. |
Indirect benefits |
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Which can be measured directly in a monetary term by known methods (weight, number, volume, load) (Direct benefits) |
Tangible benefits |
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-Which can not be measured directly (Indirect benefits) -Economic value is not traded in market -Measured benefits based on assumption by known method |
Intangible benefits |
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Forest ecosystem services |
Direct use values Indirect use values Non-use values |
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Direct use values |
Crops/livestock Animal skin Capture fisheries and aquaculture Fresh water Timber and other wood fibers Ornamental resources Biochemicals, natural medicines, genetic resources |
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Indirect use value |
Water purification and waste treatment Regulation of water timing and flows Erosion control and sediment retention Natural hazard mitigation /Flood control Disease mitigation Regional/ local/ global climate regulation Maintenance of air quality |
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Non-use values |
Existence value, Bequest value Ethical and spiritual values Educational and inspirational values Recreation and ecotourism |
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is the sum of use values and non-use values. TEV = Use Value + Non Use Value = (DUV+IUV+OV) + (EV) DUV = Direct Use Values IUV = Indirect Use Values OV = Option Value EV = Existence Value |
Total economic value (TEV) |
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Current use of the resources and services- Timber and non timber forest product (Consumptive); recreation. education, research (Non consumptive). |
Direct use value |
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Related to ecological functions that the forests provide, e. g. ground water recharging, flood control, soil & water, regulation of stream flow, climate mitigation, soil, conservation, improvement. |
Indirect use value |
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Retaining the option of using a forest resources in the future by protecting or preserving it today e. g. water purification, carbon sequestration, biodiversity, soil fertility, temperature control etc. |
Option value |
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Originates when people are willing to pay to conserve a resource for the use of future generations e. g. conservation of endangered species, rare species, heritage site etc. |
Existence Value |
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-Valuation can simply be defined as an attempt to put monetary values to environmental goods and services or natural resources. - is concerned with all values or services or benefits measured in monetary term. |
Economic valuation |
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-Many goods and services are traded in local markets, including wood products (timber and fuel), non-wood forest products. -Quantity of forest produce collected by the local people is recorded -Prices are derived within the market place through interaction between consumers and producers. -Time value for collection is considered Useful method for assessing tangible benefits |
Direct Market Valuation Approach |
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-is the most popular techniques toevaluate intangible benefits of forests (Tom, 2009). This is the survey based method used to estimate the economic value in monetary terms. -CVM is based on directly asking the people how much they are willing to payfor the benefitor willing to accept compensation. -Socio-economic characteristics of the concerned respondents is necessary. -Survey can be conducted on telephone, mail, in person. |
Contingent valuation method |
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Method used for applying CVM |
Contingent referendum method (yes/no) Open ended question method Bidding game method Payment card method |
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No freedom to express actual value for WTP |
Contingent Referendum Method: (Yes/No) |
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Respondent has the full freedom to state any value for intangible benefits. |
Open ended question method |
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The maximum willingness to pay is determined by the bidding process. Bidding start from higher value to lower (till says Yes) From lower value to higher WTP (Till says No) |
Bidding game method |
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A set of monetary values will be given to the respondent. The respondent has to choose one of the value according to his choice. |
Payment card method |
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-Clawson (1959) developed .-------&Thissurvey basedmethodcommonlyusedto estimate environmental benefits of recreational sites. -TotalCost-Travelcost,traveltime,expn.onfood, accommodation charges, entry fee, time value is considered. -Basic socio economic variables of respondents is necessary- income, group size, education, age, occupation, distance travelled etc. -This method give the accuratemonetary value for benefits. |
Travel cost method |
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Quality of ecosystem services reflectedin prices. Local propertyA particular buyer may beWilling to pay more amount for some area that he may not be willing to pay for other area. Examples:Pricesoflandandhousesfoundmoreinhill stations than other places. Peoplealways pay more for better environmental quality, aesthetic and scenic views of sites. |
Hedonic pricing |
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used to estimate the economic value of ecosystem products or services that contribute to the production of commercially marketed goods. The method traces impact of change in ecosystem services on produced goods. -Soil fertility improves crop yield, rainforests increase rainfall and crop output, mangrove forests enhance fish breeding, better pollination etc. -Compare the reduced cost of input and increased crop yield with previous conditions |
Production Function Method |
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Deals with the study of manufacturing logs from standing forests, their conversion into lumber, pulp, paper, plywood, and board products, and, their trade. |
Forest industry economics |
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Deals with all economic problems concerning the growing of forests and producing all products. like timber, wildlife, water, outdoor recreation and forage from forest land. |
Forest Management Economics |
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Trees suitable for conversion into industrial forest products. Sometimes this term is used as a synonym for industrial roundwood. |
Timber |
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standing timber in its unprocessed form as it is found in the woods. |
Stumpage |
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selling price minus production costs minus margin for profit and risks. |
Stumpage value |
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the process of estimating the value of standing timber for purposes of revenue assessment, tax collection and as a guide for buying and selling timber. |
Stumpage valuation |
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the price at which the seller sells the timber. (DA |
Stumpage price |
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It is the characteristics and uniqueness of the timber production |
Peculiarities of timber production |
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Once a forest is established it is fixed space, therefore, it becomes essentially immobile or permanent. |
Immobility of standing timber |
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Stumpage production requires longer period of time. |
Time period involved |
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Timber is the product and also the machine itself. |
Dual nature of standing timber |
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it will influence greater expenses. |
High ratio of inventory to annual production |
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Time period involved coupled with the dual nature of standing timber produces a peculiarity of stumpage production. |
One-way flexibility of production and marketing |
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Forest trees grow in a forest stand and cannot be treated entirely As individual entities |
Aggregate nature of forest |
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Timber production occupies much space, therefore, the presence of externalities is very obvious. |
Presence of externalities |
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An important consideration in timber production can be treated like any other input in timber production. - e.g. all other inputs for a tree plantation can fixed time become the variable inputs. The decision of when to harvest depends on - Biological maturity of timber species - Objectives of management |
Time |
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the complete life cycle of a crop from establishment until final harvest |
Rotation |
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the number of years between two major harvests in the same working unit and/or region (PD 705) or the number of years it takes before an uneven-aged forest can be logged again. |
Cutting cycle |
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climate with two pronounced seasons and a dry season between November and April: cutting cycle 45 years; |
Type 1 |
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climate without a dry season and with a very pronounced maximum rainfall between November and January: cutting cycle 35 years: |
Type 2 |
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climate without very pronounced season but relatively dry between November and April: cutting cycle 40 years; |
Type 3 |
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climate with rainfall more or less evenly distributed throughout the year: cutting cycle 30 years. |
Type 4 |
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The value of money varies in terms of time - The time value of money (TVM) is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. - TVM is an important concept in financial management. - TVM help us in knowing the value of money invested. |
Time Value of Money (TVM) |
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As we know future is never certain and we can’t determine the risk involved in the future because outflow of cash in our hand as payment whereas there is no certainty causing inflows. |
Risk and uncertainty |
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In an inflationary economy, the money rescued today, has more purchasing power than the money to be received in the future. In other words, a Peso today represents a greater real purchasing power than a rupee in the future. |
Inflation |
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- Individuals generally prefer current consumption to future consumption |
Consumption |
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an investor can profitability use the receive money today to get higher return tomorrow or after a certain period of time. |
Investment opportunities |
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Small business often have a limited resources to invest in business, activities and expansion. One of the factors we have to look at is how to invest, the time values of money. |
Investment Decision |
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When a business chooses to invest money in a project – such as an expansion, a strategic acquisition or just the purchase of a new piece of equipment. |
Capital Budgeting Decision |
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a process by which a future value is brought to its present value |
Discounting |
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a process by which a present value is converted to its future value |
Compounding |
