LAUSR

Using 389 firm-year observations of listed firms worldwide in 27 countries that adopted International Financial Reporting Standards (IFRS) until 2010, for the period 2011-2013, the purpose of this paper is to examine the value-relevance of fair value accounting of biological assets. In order to operationalize it as the book value’s ability to explain market equity value, this study adjusts the Ohlson model. The results support that recognized biological assets are value-relevant. After including the effect of the disclosure level of biological assets, the results show that biological assets are more value-relevant in firms that exhibit higher disclosure levels. Repeating this last analysis according to the classification bearer and consumable biological assets, the results are the same for bearer biological assets. For consumable biological assets, it seems that investors do not value recognized biological assets in firms that exhibit higher disclosure levels. Given the current adjustment in the International Accounting Standard 41 - Agriculture, under which firms will be permitted to choose either the cost or the revaluation models for mature bearer plants for annual periods beginning on or after 1 January 2016, this paper seeks to help standard setters to better understand the market valuation implications of this standard.