Biological Asset Valuation and its Impact on Corporate Profitability

Abstract

Agricultural and plantation-based businesses rely heavily on biological assets in their financial reports. Because it affects reported profits and financial performance, the fair value accounting valuation of biological assets has gotten a lot of attention. Profitability, earnings quality, and financial information are all touched upon in this literature review on biological asset appraisal. This study builds on prior work that examined topics such as the appropriateness of financial information derived from fair value assessment, earnings management methods linked to biological asset valuation, and the relevance of biological assets' value under IFRS. According to the analysis, stated earnings and financial situation are very sensitive to changes in the value of biological assets. There are potential downsides to using fair value assessment, such as increased profits volatility and more room for executive discretion, despite the fact that it makes financial reporting more transparent and relevant. According to the research, stakeholders (such as investors and managers) should give serious thought to biological asset value when trying to make sense of financial statements since it is a key factor in determining financial performance.