Is fair value information relevant to investment decision-making: Evidence from the Australian agricultural sector?

Abstract

Despite major accounting standards boards worldwide continuing to use fair value extensively, academic evidence on the relevance of fair value accounting has focused on financial assets. This study breaks new ground to provide the first empirical evidence for the agricultural sector on the relevance of fair value accounting. It examines the forecasting power of the fair value of biological assets for future operating cash flows. Using all agribusinesses listed in Australia, where fair value accounting was first implemented in the agricultural sector, we find that fair value of biological assets does not provide incremental forecasting power for future operating cash flows, whether market-determined prices or managerially estimated value is used. The findings of this study provide empirical support for the call by Elad and Herbohn in 2011 for the International Accounting Standards Board (IASB) to revisit the implementation of fair value accounting in the agricultural sector. JEL Classification: G14, G38, M41, Q18

Conducting systematic literature reviews and bibliometric analyses

“…Articles have looked at R&D valuation (Chen et al, 2018), investments in R&D (Hamada, 2017) and market orientation (Bucic et al, 2017). Other topics that have recently attracted attention in the AJM include research on the board of directors as well as decision making with regard to investments (He et al, 2018; Hutcheson and Newell, 2018), bank locations (Heard et al, 2018) and the effects of board independence on decision making (Bird et al, 2018). The influence of the 2015 Qualitative Finance Special Issue is also visible in this map through the bursts in topics such as culture, employment and pension (i.e.…”

Valor Justo Das Commodities Agrícolas Como Determinante Do Lucro Líquido Das Companhias Abertas Brasileiras

“…Contudo, Svoboda e Bohušová (2017) expuseram que, no caso excepcional de plantas portadoras, a mensuração a custo histórico é mais satisfatória. Bem como He et al (2018) não encontraram relevância para tomada de decisão na mensuração a valor justo de ativos biológicos.…”

“…Assim, os resultados do estudo apontam que o custo histórico é a maneira mais adequada para mensurar plantas portadoras, enquanto o valor justo é mais adequado para a mensuração de animais vivos. Já He et al (2018) examinaram se a mensuração a valor justo de ativos biológicos possui poder de prever fluxos de caixa operacionais, tendo por amostra todas as empresas do setor agrícola listadas na bolsa da Austrália (46 companhias). Os autores compararam o valor justo dos preços determinados pelo mercado versus o valor justo estimado gerencialmente e não constaram superioridades em termos de fornecer informações relevantes para a tomada de decisões.…”

The Impact of Fair Value Accounting on Information Asymmetry: Evidence from Jordanian Banking Sector

“…In addition to this, the study showed that banks that received comprehensive narrative disclosures on their own credit risk are less exposed to the bid-ask spread. Using a sample of agribusinesses listed in Australia, Colly et al (2018) claimed to provide the first empirical evidence for the agricultural sector on the relevance of FVA. The study examined the forecasting power of the fair value of biological assets for future operating cash flows.…”