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Fair value versus historical cost valuation fro biological assets: implications for the quality of financial information

This research finds neither significant differences in earnings and revenues for farms using fair value (FV) for biological assets with respect to those valuing at historic cost (HC), nor an increase in their volatility. It does not bring about differences in profitability, accounting manipulation and farm cash flows predictability either. On the contrary, most tests reveal higher predictive power of future earnings under FV. The study also provides evidence on flawed HC accounting practices in the agricultural sector and concludes that FV seems an interesting tool for the predominant small holdings in the agricultural sector in the European Union.


Josep Maria Argilés Bosch

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