Proceedings of the 17th International Academic Conference, Vienna

METHODS OF ACCOUNTING AND ASSESSMENT OF THE BIOLOGICAL ASSETS AND AGRICULTURAL PRODUCTS IN THE ABSENCE OF AN ACTIVE MARKET (BY THE INTERNATIONAL ACCOUNTING STANDARDS)

LEVAN SABAURI, ELENA KHARABADZE

Abstract:

Reform of accounting secures its refinement according to the universally recognized guidelines, assumptions and regulations set out in the International Financial Reporting Standards (IFRS). According to this concept direct application of the IFRS or creation of the national system of accounting and reporting make the relevant information even more reliable. In addition to the financial accounting the application of IAS 41: “Agriculture” supports the agricultural enterprises in management accounting, their development strategies and scientifically substantiated economic decisions. IAS 41: “Agriculture” came into effect in 2003 emphasizing the specifics of agriculture and the methods how the information on farming and biological assets has to be reflected in financial reporting. IAS 41 also establishes Biological assets at their fair value that is noteworthy in terms of practicability. However, IAS application requires the national legislation to be drafted for accounting the livestock and plants and relevant changes made to the standard acts. Assessment of the biological assets and agricultural products is the biggest emerging challenge in the introduction of IAS 41. As yet, the normative documents in Georgia do not say anything as to the calculation of fair value of biological assets and agricultural products. As said above, the fair value at the active market cannot always be determined. Hence, we suggest to apply the databank we have developed. According to this method an enterprise may employ the databank in order to evaluate its own food products, perennial plants, live weight gain and brood (a calf, piglet, lamb, and stallion). In the absence of the active market, the suggested databank and methods of definition of biological assets and agricultural products make accurate and transparent assessment and accounting possible. However, it is noteworthy that whatever way the value may be defined in (depending on the availability or absence of the active market), the value determination method is to be reflected in the accounting policy developed in line with the IFRS. Assessment of the biological assets and agricultural products at their fair value is subject to adjustments, though the suggested method makes for more accurate evaluation of the performance results, transparency of information in the financial statement and efficiency of a company.

Keywords: Accounting, Fair value, Exchange, Initial Price, Biological Assets, Analysis of reliability, Active Market, Agricultural enterprises, discount rate, average growth

DOI: 10.20472/IAC.2015.017.074

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