Is fair value accounting effect relevant to earnings? A study of companies within biological assets segment between 2010 and 2013.

This paper aims to analyze the effect of changes in the fair value of biological assets to net profit of companies with activities related to agribusiness. To conduct the survey were investigated 21 companies of five sectors (agriculture, sugar and alcohol, meat, paper and wood) for 4 years (2010-2013). As the basis of inferences, we used non-parametric test of paired sample Wilcoxon on profit data with and without the effect of the change in fair value of biological assets. In addition, an analysis was made on the assumptions that companies used. The results show that the positive and negative effects of changes in the fair value of biological assets on the outcome of the analyzed companies were significant (for almost all sectors) both at initial recognition as in subsequent years. In relation to the disclosure, it was found that most companies assessed used the discounted cash flow model as a measure of these assets, this shows greater subjectivity of such a measure. This greater subjectivity can increase the relevance of financial information to investors but also increases the volatility of the results which can result in increased funding costs for the analyzed companies.