Relevance of Fair Value in Biological Assets: An Experimental Analysis on Market Perception Versus the Academic Perception

Abstract

Criticisms have been made from both the academic and business environments about the importance and usage of fair value (FV), especially for assets related to agricultural products without an active trading market. For analyzing what is the relevance of the FV method to biological assets for users, an experiment was made with 217 market professionals attending the Executive MBA course and 155 undergraduate students in accounting, from the perspective of the Counterfactual Thinking Theory. The following stimuli were considered if: (i) the result (losses or gains) arising from the evaluation at FV, (ii) the type of biological asset (with or without liquidity), and (iii) the managerial decision (held the asset to the maturity date or make it available for sale) interfere in the judgment of the relevance of FV in biological assets. The findings indicate that the use of FV is relevant for the measurement of biological assets in opposition to the historical cost. Type of asset (eucalyptus as without an active market) and managerial decision (make it available for sale) led to different perceptions for academicians that considered more relevant the use of FV. For market professionals, results also indicate the type of asset (eucalyptus) affected their FV judgment as an appropriate metric for value asset. Our findings also can be concluded that the perception of the relevance of the FV method is greater to evaluate biological assets (bovines and forests) than the reliability in the process and the outcomes.