Fair Value Accounting: measurements of biological assets in praxis and perspectives of accounting professionals in the Brazilian sugarcane sector

Abstract

This study aimed to analyze the context of fair value measurements of biological assets under the accounting professionals’ perspective from the Brazilian sugarcane sector. Secondly, verifying the existence of clusters among the participants of the study and also checking whether or not there is a relationship between the accounting professional’s profile and his perception of the impacts on the measurement of biological assets. A field study was carried out utilizing a survey with qualitative and quantitative approach, involving cluster analysis, content analysis and Fisher’s exact test, considering a population sample of 32 accounting professionals from the sector. From the cluster analysis it was possible to identify the existence of three professional groups with similar characteristics of profile and perception of impacts brought by IAS nº 41. The quantitative analysis shows that the professionals that work in plants located in states with high or low concentration of sugarcane productive chain perceive the rule distinctively. The qualitative analysis suggest that there are two views, one against and the other in favor of the rule, showing that there is not a consensus when it comes to enforcing the rule in the sector. As few studies attempt to analyze the impact, advantages and disadvantages from the accountant’s point of view, this study contributes to fill out this gap. This study offers insights to the governing entities on the necessity of a greater practical detailing and problems related to the acceptance of the rule in Brazil.

Impacto das Emendas às IAS 16 e IAS 41 na Posição Econômico-financeira das Empresas Sucroenergéticas Brasileiras

“…Although there was a reduction in the balance of the variation in the fair value of biological assets, the effect on net deferred taxes is inconclusive since the ICI of this accounting balance showed a high standard deviation and a stable median. These findings corroborate Cavalheiro et al (2018), who identified that the impact on deferred income tax was considered by 40.63% of the accounting professionals interviewed in the sugarcane sector. The impact of measuring biological assets at fair value in deferred taxes was also evidenced by Rech, Pereira, and Oliveira (2008) in the livestock activity and by Einsweiller and Fischer (2013) in the pulp and paper companies.…”

“…Accounting professionals in the sugarcane sector also understand that the choice of methods, techniques, and methodologies impacts the variation in the fair value of biological assets, in the total value of these assets and equity (Cavalheiro et al, 2018). Such results are also in line with those found by Queluz et al (2019), in which they suggest that the reclassification of bearer plants in fixed assets impacted the variation in the fair value of biological assets.…”

“…At the same time, critics claim that the calculation of fair value is complex and surrounded by judgments, results in less reliability, does not increase information capacity and relevance for decision-making and is generally not used by investors. Thus, more conservative accounting professionals believe that it is better to use the cost method to measure sugarcane (Cavalheiro et al, 2018).…”

“…Thus, the new measurement criteria for bearer plants can impact companies' liquidity, capital structure, and profitability indicators, especially those that exploit sugarcane (Oliveira, Silva, Prado & Barbosa, 2018). However, there is no consensus among accounting professionals on the impacts of IAS 41 on the sugar-energy sector (Cavalheiro, Gimenes & Binotto, 2018).…”

Uniformidade e consistência das escolhas no reconhecimento e mensuração de ativos biológicos

“…We noticed several choices related to the methodology (WACC/CAPM, APM, sectoral rate, etc.) and its components (risk measures, beta, risk-free rate, return...), even within the same segment (Cavalheiro & Binotto, 2018). There is still the understanding that the rate is not disclosed in the notes because it is a strategic information (Machado et al, 2014).…”