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Is Fair Value Measurement Appropriate for Biological Assets?: The Case of Small Agriculture, Forestry and Fishing Enterprises in Croatia

In the context of assessing business quality as well as making numerous business decisions, the question of assessment and evaluation of the financial statement positions is of particular importance. In majority of economies, enterprises that dominate in the agricultural, forestry and fishing sector are micro, small and medium-sized. Financial reporting on biological assets is prescribed by relevant accounting standards. In this paper, the focus is on three accounting standards specially designed for micro, small and medium-sized enterprises that deal with accounting treatment of biological assets. Biological assets need to be measured at fair value model and when fair value is not readily determinable without undue cost or effort, enterprises should use cost model. The main purpose of this paper includes exploring the extent to which Croatian small enterprises apply fair value in the field of financial reporting of agricultural, forestry and fishing activity and whether there are differences in the intensity of applying fair value to the cost model depending on the type of biological assets. The research results indicate that small agricultural, forestry and fishing enterprises in Croatia, which classify their resources as biological assets, are more prone to use cost method compared to fair value measurement approach. By comparing statistics for the cost and fair measurement method, it can be noticed that the measurement method does not affect total assets value of analysed small agricultural, forestry and fishing enterprises in Croatia. That result raises the question about the usefulness of using fair value measurement by smaller enterprises.

small enterprises, fair value, biological assets, accounting standards, agriculture, forestry and fishing enterprises

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