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Valuation of biological assets under IAS 41 - The case of listed and large companies in Croatia

There are many areas of accounting estimates when valuating biological assets under IAS 41 – Agriculture. Before the amendments to the standard in 2014, companies were required to measure all biological assets at fair value, which caused certain practical issues, especially when there was no active market. Previous research has shown that a significant number of companies applied the cost model as a result of not being able to estimate fair value reliably.Moreover there was general impression that the costs of measuring biological assets at fair value were higher than the benefits. Therefore, the IASB introduced changes to the standards related to biological assets, allowing companies to choose between the cost and the revaluation model, but limiting the scope to only bearer plants.. The aim of this paper is to analyze the practical challenges of applying IAS 41 before and after the revision of this standard. An empirical research was conducted in order to assess how these changes will affect companies in Croatia. The findings indicate that the effect is not expected to be significant, due to the fact that the proportion of biological assets in their balance sheet is relatively small and that the majority of them already value long-term biological assets using the cost model.

accounting estimates ; biological assets ; International Accounting Standards ; fair value ; Croatia

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