ADVANTAGES AND CHALLENGES OF APPLYING THE FAIR VALUE METHOD ACCORDING TO INTERNATIONAL FINANCIAL REPORTING STANDARDS FOR AGRICULTURAL ENTITIES

Abstract

Agricultural activities are different from other activities undertaken by business units for profit. When preparing financial statements, it is mandatory to comply with certain regulations, legal acts and standards, so the IAS 41 Agriculture  is very relevant for agricultural entities. The concept of fair value prevails in this standard and there is a notable obligation for agricultural entities to value biological assets at fair value less costs of sale. The importance of fair value in financial reporting is increasingly being noticed in the scientific literature and the recent debate is about the trend of fair value reporting. Challenges are often encountered in the application of this method in the agricultural sector, therefore, the conducted research seeks to reveal the advantages and disadvantages of applying the fair value method. The application of this method is a long, expensive and complex process, but, nevertheless, the application of the method makes it easier to determine the value of the trade, helps entities to make appropriate financial decisions and assess potential risks.