Is fair value information relevant to investment decision-making: Evidence from the Australian agricultural sector?

Li Yu (Colly) He, Sue Wright and Elaine Evans
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Li Yu (Colly) He: Department of Accounting and Corporate Governance, Faculty of Business and Economics, Macquarie University, Sydney, NSW, Australia
Sue Wright: Newcastle Business School, The University of Newcastle, Callaghan, NSW, Australia
Elaine Evans: Department of Accounting and Corporate Governance, Faculty of Business and Economics, Macquarie University, Sydney, NSW, Australia

Australian Journal of Management, 2018, vol. 43, issue 4, 555-574

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. JEL Classification: G14, G38, M41, Q18

Keywords: Agricultural sector; future operating cash flows; relevance of fair value accounting (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:43:y:2018:i:4:p:555-574

DOI: 10.1177/0312896218765236

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