Accounting Agriculture Essay examples
Agricultural activities are rarely the focus of accounting research, and up until December 2000 no accounting standard existed for accounting activities in the industry at an international level. This report investigates the AASB 141 Agricultural accounting standard, discusses the background of the standard, which entities are affected by the standard and evaluates its usefulness and applicability in the industry. It was found that despite been acknowledged as a standard which provides a good conceptual framework it is often held back by its focus on theory and shift away from practicality (Elad, 2004).
Intro & Background to the standard
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The reflection of biological assets and agricultural produce in financial statements for stakeholders is necessary so that they precisely analyse companies focusing on agricultural products. Once biological assets and agricultural produce are recognised, they need to be measured properly. First, biological assets are measured through initial recognition at fair value minus the projected sales costs at each reporting date if the fair value can be measured reliably. Otherwise, there might be some problems for measuring biological assets.
If the historical method is used instead of fair value minus estimated point of sale costs, it is likely that historical cost provides irrelevant information, not reflecting any price change in biological assets, and the cost cannot accurately portray the accretion in value (Deegan, 2012). There were two methods expected to replace fair value less estimated point of sale costs; net present value and current market value. Net present value method indicating the present value of future cash flows by discounting future cash flows has some problems because it tends to reduce the reliability of the amount calculated. That is mainly because the method has many assumptions, which seems to be that the method does not reflect the