Is fair value information relevant to investment decision-making

Evidence from the Australian agricultural sector?

Liyu He, Sue Wright, Elaine Evans

Research output: Contribution to journalArticle

4 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)555-574
Number of pages20
JournalAustralian Journal of Management
Volume43
Issue number4
Early online date11 Jul 2018
DOIs
Publication statusPublished - Nov 2018

Keywords

  • Agricultural sector
  • future operating cash flows
  • relevance of fair value accounting

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