The usage of the fair value for the evaluation of biological assets arising from the adoption of international accounting standards have caused significant economic effects on the value of the companies and, hence, on their current and future results. Furthermore, there is a number of criticisms – from both the academic and business environments – about the importance and usage of such evaluation metrics, especially for assets related to agricultural products which do not have an active trading market, for instance: eucalyptus forests.

Thus, the present study aimed to analyze if the users of the accounting information acknowledge the importance of using the fair value method to measure the biological assets. To analyze the issue, this study conducted an experiment with 217 market professionals attending the Executive MBA course and 155 students from the Graduation Course in Accounting, from the perspective of the Counterfactual Thinking Theory. The following stimuli about the judgment of the relevance of fair value in biological assets were considered: (i) if the result (losses or gains) arising from the evaluation at fair value, (ii) if the type of biological asset (with or without liquidity) and (iii) if the managerial decision (hold the asset to the maturity date or make it available for sale) interfere in the judgment of the relevance of fair value.

The findings reveal that the use of fair value is relevant for the measurement of the biological assets, in opposition to the use of the Historical cost. It has also been found that the fair value is more important for the assets without active market (eucalyptus) than for the assets with net market (bovines). Thereby, the findings of the research adhere to the guidelines of the List of International Financial Reporting Standards recommending the adoption of the fair value as a measurement methodology for such assets (eucalyptus and bovines), although there is still some concern with the reliability of the measurement approach (fair value).

By: JOSÉ MARCOS DA SILVA, University of Sao Paulo (USP) – Faculty of Economics, Administration and Accounting of Ribeirão Preto (FEARP), AMAURY JOSÉ REZENDE, University of Sao Paulo (USP) – Faculty of Economics, Administration and Accounting of Ribeirão Preto (FEARP), and GUILLERMO OSCAR BRAUNBECK, University of São Paulo

See the SSRN paper here