Fair Value Model Proposal For Dairy

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Fair value: model proposal for the dairy sector
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DOI: 10.1108/AFR-04-2014-0008
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Agricultural Finance Review
Fair value: model proposal for the dairy sector
Jonas da Silva Oliveira Graça Maria do Carmo Azevedo Cláudia da Silva Amaral Santos Sandra
Cristina Santos Vasconcelos
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Jonas da Silva Oliveira Graça Maria do Carmo Azevedo Cláudia da Silva Amaral Santos Sandra
Cristina Santos Vasconcelos , (2015),"Fair value: model proposal for the dairy sector", Agricultural
Finance Review, Vol. 75 Iss 2 pp. 230 - 252
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AFR
75,2
Fair value: model proposal for
the dairy sector
Jonas da Silva Oliveira, Graça Maria do Carmo Azevedo,
230 Cláudia da Silva Amaral Santos and
Sandra Cristina Santos Vasconcelos
Received 3 April 2014 Aveiro Institute of Accounting and Administration, University of Aveiro,
Revised 29 October 2014
19 January 2015 Aveiro, Portugal
Accepted 16 February 2015
Abstract
Purpose – The purpose of this paper is twofold. First, it intends to assess the level of comparability of
the fair value-based valuation criteria for biological assets of Portuguese dairy farms after the adoption
of the Portuguese Accounting Standardization System. Second, it presents an innovative valuation
model to assess the fair value of dairy herds.
Design/methodology/approach – The paper conducts a multiple case study at dairy farms in the
central region of Portugal which had adopted the new Accounting Standardization System. Data were
captured through interviews to assess how dairy farms were using the new valuation criteria required
by this recent accounting frame of reference. A proposal for a model to measure fair value is presented.
Findings – Main findings indicate that market values for dairy production animals are inconsistent,
reducing financial information comparability levels. To solve these problems, the authors propose a
new model to assess fair value based on the net present value (NPV) of future cash-flows. This is a
possible method to measure bovines that are in a breeding stage and it will assure the comparability of
financial statements among dairy farms.
Research limitations/implications – The study is confined to one case study and one country, not
allowing generalization.
Originality/value – Results indicate the need to harmonize one possible method for measuring cattle
that are in a breeding stage. In order to overcome these shortcomings, a model was designed to
calculate the fair value of dairy production based on the NPV of future economic benefits.
Keywords Regulation, Financial reporting, Fair value, Biological assets, Dairy sector
Paper type Case study
I. Introduction
In 2002 the European Commission released the Regulation (EC) 1606/2002 requiring the
adoption of International Accounting Standards/International Financial Reporting
Standards (IAS/IFRS) by all companies with securities traded in a European stock
exchange regulated market in the preparation of their consolidated accounts. The same
regulation did also allow member states to extend this requirement to other companies.
Based on this permission, in July 2009 the Portuguese Accounting Committee (CNC –
Comissão de Normalização Contabilística) approved a new accounting frame of
reference entitled Portuguese Accounting Standardization System (SNC – Sistema de
Normalização Contabilística). Consistent with Regulation (EC) 1606/2002, the SNC’s
accounting standards were based on IAS/IFRS, which superseded the previous
Portuguese Accounting Plan (POC – Plano Oficial de Contabilidade), and were first
adopted by Portuguese unlisted companies in January 2010.
Agricultural Finance Review The SNC’s accounting standard that deals with agriculture is Accounting and
Vol. 75 No. 2, 2015
pp. 230-252
Financial Reporting Standard (NCRF – Norma Contabilística de Relato Financeiro) 17
© Emerald Group Publishing Limited
0002-1466
(Agriculture). At an international level, there are some studies that have analyzed the
DOI 10.1108/AFR-04-2014-0008 impact of the adoption of IAS 41 (Agriculture) in different countries (Elad and Herbohn,
2011; Fisher et al., 2010; PriceWaterhouseCoopers, 2009, 2011). Moreover, these Fair value
international studies focused on the impact of the new valuation criteria required by
IAS 41: fair value. However, there are no research studies on the impact of the adoption
of IAS/IFRS adapted standards by unlisted companies in specific countries.
In Portugal, only one study has focused on the analysis of the factors influencing
the preparedness of Portuguese unlisted companies to adopt SNC (Guerreiro et al.,
2012). The present study seeks to overcome this research gap through the analysis of 231
the adoption of NCRF 17 (Agriculture) by the Portuguese dairy sector.
The dairy sector is crucial to world economy, currently being one of the most
competitive and influential sector in food industry. The present study focuses on
Portuguese dairy farms for three main reasons. First, the European Union is the biggest
producer and exporter of milk, followed by the USA, New Zealand, and Ukraine (CLAL,
2012). Second, production efficiency studies have concluded that countries in Western
Europe (such as Portugal) and Australia have on average higher levels of technological
efficiency compared to other countries such as North America, Eastern Europe, Asia,
Africa, and Latin America (Bravo-Ureta et al., 2007). Third, in the European Union milk
production from Poland, Italy, the Netherlands, UK, France and Germany represented
72 percent of total production in 2011. However, Portugal continues to present the
highest value of milk production (kg) per cow (7,221 kg/cow) compared to European
Union mean values (6,692 kg/cow) (Eurostat, 2014a). Moreover, in Portugal this sector
represented in 2011 around 11 percent of the total agro-food industry (IACA, 2011).
The contribution of the present study is twofold. Based on semi-structured
interviews to Chartered Accountants of different dairy farms, a multiple case study
was conducted to assess the impact of the adoption of NCRF 17 by the Portuguese
dairy sector. The measurement criteria proposed in NCRF 17 (Agriculture) is: fair value
less estimated cost to sell. However, the accounting standard indicates different ways
to assess fair value. Therefore, the present study intends to examine the alternative
mechanisms for valuing animals. This will allow appraisal of the comparability level of
biological assets (such as dairy herds) valuation criteria used by Portuguese dairy
farms after two years of the first adoption of SNC in 2010. Thus some research
questions will be analyzed: do dairy farms measure their dairy herds the same way
they used to? Will farms’ financial information be comparable after the application of
fair value criteria? What implications does the animal measurement have in dairy
farms net income variation?
Main findings indicate that the market-based sources of information used to
measure dairy herds are divergent in terms of their animal’s age classification bands
and prices. This inconsistent information leads to non-comparable financial
information within the dairy sector. Therefore, the impact of the adoption of NCRF
17 in the Portuguese dairy sector was inconclusive. Moreover, consistent with Chen
et al. (2013) dairy herds’ measurement of fair value was strongly influenced by prices’
volatility, affecting dairy farms’ net income.
However, the accounting standard NCRF 17 (Agriculture) suggests that in case
there is no market price for a specific type of biological assets, valuation should be
made based on the present value of expected net cash-flows from the asset, discounted
at a current market-determined rate before taxes. Therefore, the present study focuses
on the development of an innovative methodology to assess the fair value of dairy
herds based on their net present values (NPV). The proposed model does not
incorporate market prices volatility. This innovative fair value methodology
incorporates production efficiency factors such as animal’s useful life, number of
AFR useful working days in production, average daily milk production throughout the
75,2 animal’s useful life, milk prices, feeding costs, and animal’s selling price for culling.
This is a possible method to measure bovines that are in a breeding stage assuring the
comparability of financial statements among dairy farms, basically because it
represents more accurately the dairy sector’s true value of the animals. From an
accounting point of view, the comparability and reliability of financial information
232 promoted by the application of this new valuation model would lead to a better
assessment of dairy farms’ business risk with consequent impacts in the cost of debt
contracted with financial institutions.
In the following section, we contextualize the diverse accounting policies in terms of
measurement criteria in agriculture proposed by different accounting frames of
reference. In Section 3 we review previous literature and thereafter, explain our
research method, report results, and present conclusions.
II. Agriculture and the accounting measurement criteria

In SNC issues related to agriculture are reserved to NCRF 17 (Agriculture). The SNC’s
accounting standards are based on IAS/IFRS, and therefore the recognition and
measurement criteria followed by NCRF 17 are quite similar to IAS 41 (Agriculture).
However, these new accounting policies are significantly different from those followed
by POC, the previous Portuguese accounting frame of reference. Table I presents the
main recognition and measurement criteria related to biological assets established by
POC and SNC. For an international discussion on the topic Table I also includes the
accounting policies proposed by the regulatory entities of those countries considered
the main players in the dairy sector: FASB (Financial Accounting Standards Board)
in the USA, AcSB (Accounting Standards Board) in Canada, NZASB (New Zealand
Accounting Standards Board) in New Zealand, AASB (Australian Accounting
Standards Board) in Australia, and FRSC (Financial Reporting Standards Council) in
South Africa.
A biological asset is a living animal or plant, such as dairy cattle. Biological assets
are different from agricultural produce, which is the harvested product of the entity’s
biological assets, such as milk from dairy cattle.
From an international perspective, Table I shows that those countries considered the
most important players in the dairy sector apply the accounting recognition/
measurement criteria proposed by the International Accounting Standards Board
(IASB). The only exception is the United States of America. FASB has specific
recognition/measurement criteria for biological assets, which are quite similar to those
proposed in the previous Portuguese accounting frame of reference.
The accounting recognition/measurement criterion followed by the previous POC is
very different from the one established in SNC. In POC biological assets were
considered fixed assets measured at cost less any accumulated depreciation. In SNC,
the NCRF 17 requires that all biological assets shall be measured at fair value less costs
to sell. However, there is an opt-out clause that suggests that biological assets can be
measured at cost less any accumulated depreciation and any accumulated impairment
losses if fair value cannot be measured reliably. This opt-out clause can only be applied
in the initial recognition of biological assets.
Elad and Herbohn (2011) findings indicate that some countries did not use the opt-
out clause, but others did. This undermines the comparability of financial information.
Moreover, IAS 41 and NCRF 17 express different ways to assess fair value. If an active
market exists for a biological asset, the quoted price in that market is an appropriate
Accounting frame of
Fair value
reference Recognition criteria Measurement criteria
Portuguese Biological assets shall be recognized Biological assets shall be measured at

Accounting Plan (POC) as property, plant and equipment their acquisition or production costs,
assets less any accumulated depreciated
amounts
Portuguese An entity shall recognize a biological A biological asset shall be measured 233
Accounting asset when and only when: on initial recognition and at the end of
Standardization (a) The entity controls the asset as a each reporting period at its fair value
System (SNC) result of past events less costs to sell
(b) It is probable that future economic A biological asset shall be measured
benefits associated with the asset will at its cost less any accumulated
flow to the entity depreciation and any accumulated
(c)The fair value or cost of the asset impairment losses, only and only if the
can be measured reliably presumption that fair value can be
measured reliably is rebutted on initial
recognition
International An entity shall recognize a biological A biological asset shall be measured
Accounting Standards asset when and only when: on initial recognition and at the end of
Board (IASB) (a) The entity controls the asset as a each reporting period at its fair value
Accounting Standards result of past events less costs to sell.
Board of Canada (b) It is probable that future economic A biological asset shall be measured
(AcSB) benefits associated with the asset will at its cost less any accumulated
Australian Accounting flow to the entity impairment losses, only and only if the
Standards Board (c) The fair value or cost of the asset presumption that fair value can be
(AASB) can be measured reliably measured reliably is rebutted on initial
New Zealand recognition
Accounting Standards
Board (NZASB)
South African
Financial Reporting
Standards Council
(FRSC)
Financial Accounting Except for animals with short All direct and indirect costs of
Standards Board productive lives classified as developing animals shall be
(FASB) inventory, all of the following shall be accumulated until the animals reach
recognized as fixed assets: maturity and are transferred to a Table I.
(a) Breeding animals productive function. Dairy farms and
(b) All livestock (which includes Fixed assets shall be depreciated over accounting
cattle, hogs, sheep, and goats) their useful lives recognition/
(c) Production animals measurement criteria
basis for measurement. NCRF 17 states that the quoted prices published in the
Portuguese Information System on Agro-Food Markets (SIMA[1] – Sistema de
Informação de Mercados Agrícolas) can be used to assess fair value.
If an active market does not exist, fair value can be assessed by: the most recent market
transaction price; market prices for similar assets with adjustments to reflect differences;
sector benchmarks; and present value of expected net cash flows from the assets
discounted at a current market-determined rate before taxes. These different alternatives
induce subjectivity in estimates of fair values undermining comparability and reliability of
financial information and providing scope for manipulation (Herbohn, 2006). The present
study focuses on the examination of these alternative mechanisms for valuing animals
AFR and their impacts either in the comparability/reliability of financial information or in the
75,2 assessment of dairy farms’ business risk.
III. Literature review

In terms of IAS/IFRS adoption, one of the most debated topics concerns the relevance of
fair value adoption compared to historical cost. In this sense, Barlev and Haddad (2003)
234 contend that financial reporting prepared under this new paradigm would be more
value relevant, call the attention of shareholders to the value of their equity, and
enhance the function of stewardship. Other studies have concluded also that among
banks the adoption of fair value criteria is associated with smaller profits volatility,
mainly due to standard flexibility (Fiechter, 2011).
Among all IAS/IFRS, the accounting standard that was more deeply influenced by
this new valuation paradigm (fair value valuation criteria) was IAS 41 (Agriculture).
On this regard, Aryanto (2011) concluded that the impact of IAS 41 (Agriculture)
adoption was not as positive as expected. It has generated a substantial volatility in
investment returns, influencing decision-making processes, and distorting companies’
financial comparability levels.
Similarly, Elad and Herbohn (2011) analyzed the application of fair value in the
agricultural sector due to IAS 41 (Agriculture) enforcement, through the analysis of
annual reports of small and medium agriculture companies from the UK, France, and
Australia. Findings show that financial statements lacked comparability, due to the use of
a variety of valuation criteria under IAS 41 in the three countries. In companies’ opinion
fair value recognition costs outweigh its benefits and the impact of IAS 41 adoption was
extremely reduced. As a result, authors argue that IASB should revisit IAS 41.
In New Zealand, Fisher et al. (2010) findings corroborate this argument, indicating
that the flexibility of IAS 41 allows for measurements at historical cost, which
originates discrepancies in companies’ earnings.
Silva et al. (2012) concluded that fair value adoption by Brazilian companies to
measure biological assets turns decision-making processes more difficult. Historical
cost was considered more reliable, more objective, and easier to perceive.
However, some studies have concluded the opposite (Azevedo, 2005; Fernandes,
2009; Argilés et al., 2011, 2012). Azevedo (2005) and Fernandes (2009) conducted studies
to assess the impact of IAS 41 in Portugal and have concluded that the adoption of fair
value was positive, represents a more adequate valuation model than historical cost
model, and induces a rise in companies’ earnings.
Among Spanish farms, Argilés et al. (2011) did not find any significant differences
between the valuation of biological assets at historical cost and fair value when
assessing future cash flows. However, results show more predictive power of future
earnings under fair value model. They also found several flaws in the historical cost
accounting practices adopted by Spanish farms.
By conducting interviews with students, farmers and accountants of Spanish farms,
Argilés et al. (2012) found that the interviewees make larger miscalculations and poorer
judgments under historical cost model than under fair value model. Fair value model is
friendlier than historical model, in terms of financial statements preparation and
enhances judgment in the decision-making processes.
The present paper does not intend to contribute to the discussion on the topic of fair
value model versus historical cost model. On the other hand, the different ways to
assess fair value included in NCRF 17 (Agriculture), and the existence of an opt-out
clause, leads to question the comparability of financial information. The present study
focuses on the analysis of the different valuation criteria for biological assets in Fair value
Portuguese dairy farms, and discusses potential solutions to improve future comparability
of financial information in the dairy sector.
IV. Research method

Sample 235
To attain an extensive understanding of the Portuguese dairy sector reality, the study
selected the central region of Portugal. According to Eurostat (2014a) this region is the
most important one in terms of milk production (267,165 tones), number of dairy farms
(6,974), and cows (37,000). The central region of Portugal comprises several districts.
In the present study it was selected the most important district of the central region of
Portugal, the district of Aveiro. This district has a huge density of dairy farms
(870 farms) and represents the main Portuguese region in terms of milk production.
The choice of a specific region and district was made in order to develop simulation
tests which could assess the comparability of financial information when subject to
different valuation criteria for biological assets used by the several dairy farms,
including the quoted market prices published in SIMA. SIMA quoted market prices are
presented by regions. Therefore, to exclude any potential bias derived from regions
asymmetries, the present study is focused on only one region.
The methodology used includes three steps. First, we conducted semi-structured
interviews by telephone to Chartered Accountants of all dairy farms from the district of
Aveiro. From the 870 dairy farms only seven Chartered Accountants have expressed
their will to collaborate with us and voluntarily provided all the information needed,
such as: financial statements from the year 2011, the quoted market prices used at the
end of the reporting period to value the different types of animals in the dairy farm, and
the animal’s age classification bands. We also requested some production information,
such as contribution of feeding costs, daily female calves feeding cost, daily heifer
calves feeding cost, and lactation production. Only one dairy farm provided this kind of
information. Although the response rate was low, the focus of the study was
concentrated on developing and applying a fair value methodology of dairy herds and
was used to test the proposed methodology.
With data collected at this stage we obtained seven different animal’s age
classification bands with different quoted market prices. Since NCRF 17 establishes
that Portuguese companies can assess fair values through the use of quoted market
prices from SIMA platform, we also considered SIMA’s classification bands and quoted
market prices[2]. The analysis of the results culminated in a matrix of eleven animal’s
age classification bands X eight valuation methods (Appendix).
At stage two, to homogenize the analysis, we compared the eight different animal’s
age classification bands and built one single animal’s age classification band. Then,
from the seven financial statements of the seven dairy farms, we selected four dairy
farms that have adopted SNC: two dairy farms with the highest level of positive net
income and two dairy farms with the highest level of negative net income. The selection
criteria used was useful to create homogeneity in the analysis. For confidentiality
purposes, those dairy farms will be named Company A, Company B, Company C, and
Company D, respectively. Using the eight valuation methods shown in the Appendix, a
multiple case study was conducted. Their impacts on financial information comparability
(such as biological assets and net income) were assessed after submitting financial
statements to several simulations.
AFR In a third stage, based on the NPV of the animal, an innovative valuation model to
75,2 assess the fair value of dairy herds is presented.
V. Results of the case study

Quoted market prices
236 The appendix presents the data collected from all the seven interviewees. All of them
use quoted market prices to measure their biological assets at the end of the reporting
period. These quoted market prices were obtained from animal traders and SIMA.
Appendix shows a great disparity in quoted market prices used by the different
dairy farms. Moreover, the animal’s classification bands are completely different too.
This generates a great disparity in herd measurement and undermines the
comparability of financial information across the sector.
In order to better perceive the difficulties in comparing the financial information

across the dairy sector, basically in terms of biological assets’ valuation, Table II
presents the measurement of the quantities of biological assets’ inventories at the
end of the reporting period of 2011 from the four selected dairy farms. For this
purpose, using the data in the Appendix we first built one single animal’s age
classification band to homogenize the analysis, and then we attributed the prices for
each band. The animal’s age classification bands only consider female animals,
because of the business model of dairy farms (Table II, Panel A). Then, for each of
the four companies, we ran eight simulations. Each simulation measures the
quantities of biological assets’ inventories at the different prices present in each of
the eight valuation criteria (Table II, Panel B). Only simulation 8 corresponds to
SIMA measurement criteria.
Table II (Panel B) shows that, in the four companies, simulation 3 and 4 generate an
increase in the total value of animals when compared to simulation 1. The remaining
simulations present lower values. Results are consistent among companies.
NCRF 17 refers that the changes in fair value less costs to sell of biological assets
during a given period are included in profits or losses. Thus, the simulations presented
in Table II have different impacts in net income. Table III presents the results of these
impacts considering each of the eight valuation criteria. Results indicate that the huge
disparity obtained in the biological assets’ measurement causes substantial variations
in companies’ net income.
Results reflect the evident distortion in the recognition of dairy herds. In Table III it
is shown that in Company A we can obtain a maximum of positive net income of
€52,774 or a maximum of negative net income of €58,101. The difference reaches
€110,875, obviously with a great impact on farms’ decision-making processes. We can
conclude that there is no comparability of financial information among dairy farms,
even knowing that all farms use market value.
It is crucial that the market, and especially SIMA, establish a more rigorous and
accurate measurement instrument. Only with consistent data can we obtain a true measure
of dairy herds and compare them reliably. Accounting procedures should contribute to a
rigorous decision-making process on the part of stakeholders. However, if these accounting
procedures are based on inconsistent information, even when that information is available
in the market, they cannot be useful for the decision-making process.
Quoted market prices exposes financial information to prices’ volatility.
The possibility that dairy farms have in using different sources of information
(as permitted by NCRF 17) to assess quoted market prices exacerbates this problem.
Valuation
Valuation Valuation Valuation Valuation Valuation Valuation Valuation criteria 8
Animal’s age classification bands Inventories criteria 1 criteria 2 criteria 3 criteria 4 criteria 5 criteria 6 criteria 7 (SIMA)
Panel A – Market prices per animal (according to Appendix)

A – Female calves until 1 month €50 €300 €125 €100 €100 €150 €100 €150
B – Female calves from 2 to 6 months €200 €300 €125 €100 €100 €158 €100 €325
C – Female calves from 7 to 12 months €400 €300 €400 €400 €250 €350 €250 €460
D – Heifer calves from 13 to 18 months €900 €600 €1,000 €1,000 €350 €665 €350 €500
E – Heiver calves from 19 to 24 months €1,200 €600 €1,000 €1,000 €600 €665 €600 €500
F – 1st lactation cows (25 m-36 m) €1,200 €800 €1,250 €1,250 €700 €665 €750 €800
G – 2nd lactation cows (37-48 m) €1,200 €800 €1,250 €1,250 €700 €665 €750 €800
H – 3rd lactation cows (49-60 m) €1,000 €800 €1,250 €1,250 €700 €665 €700 €800
I – 4th lactation cows (61-72 m) €900 €800 €1,250 €1,250 €700 €665 €600 €800
J – 5th lactation cows (73-84 m) €600 €800 €1,250 €1,250 €700 €665 €500 €800
K – Remaining animals’ lactation (W 85 m)) €600 €800 €1,250 €1,250 €600 €665 €350 €800
Panel B – measurement of biological assets’ inventories at the end of the reporting period
Company A
A – Female calves until 1 month 21 €1,050 €6,300 €2,625 €2,100 €2,100 €3,150 €2,100 €3,150
B – Female calves from 2 to 6 months 22 €4,400 €6,600 €2,750 €2,200 €2,200 €3,465 €2,200 €7,150
C – Female calves from 7 to 12 months 3 €1,200 €900 €1,200 €1,200 €750 €1,050 €750 €1,380
D – Heifer calves from 13 to 18 months 0 – – – – – – – –
E – Heiver calves from 19 to 24 months 0 – – – – – – – –
F – 1st lactation cows (25-36 m) 43 €51,600 €34,400 €53,750 €53,750 €30,100 €28,595 €32,250 €34,400
G – 2nd lactation cows (37-48 m) 46 €55,200 €36,800 €57,500 €57,500 €32,200 €30,590 €34,500 €36,800
H – 3rd lactation cows (49-60 m) 41 €41,000 €32,800 €51,250 €51,250 €28,700 €27,265 €28,700 €32,800
I – 4th lactation cows (61-72 m) 21 €18,900 €16,800 €26,250 €26,250 €14,700 €13,965 €12,600 €16,800
J – 5th lactation cows (73-84 m) 19 €11,400 €15,200 €23,750 €23,750 €13,300 €12,635 €9,500 €15,200
K – Remaining animals’ lactation (W 85 m) 16 €9,600 €12,800 €20,000 €20,000 €9,600 €10,640 €5,600 €12,800
Total 232 €194,350 €162,600 €239,075 €238,000 €133,650 €131,355 €128,200 €160,480
Variation (%) −16.34 23.01 22.46 −31.23 −32.41 −34.04 −17.43
(continued )
Measurement
company
biological assets by
simulations of
Fair value
Table II.
237
75,2
238
AFR
Table II.
Valuation
Company B
A – Female calves until 1 month 6 €300 €1,800 €750 €600 €600 €900 €600 €900
B – Female calves from 2 to 6 months 15 3,000 4,500 1,875 1,500 1,500 2,363 1,500 4,875
C – Female calves from 7 to 12 months 22 €8,800 €6,600 €8,800 €8,800 €5,500 €7,700 €5,500 €10,120
D – Heifer calves from 13 to 18 months 14 €12,600 €8,400 €14,000 €14,000 €4,900 €9,310 €4,900 €7,000
E – Heiver calves from 19 to 24 months 10 €12,000 €6,000 €10,000 €10,000 €6,000 €6,650 €6,000 €5,000
F – 1st lactation cows (25-36m) 25 €30,000 €20,000 €31,250 €31,250 €17,500 €16,625 €18,750 €20,000
Total 149 €122,600 €92,900 €137,925 €137,400 €75,400 €81,453 €74,200 €93,495
Variation (%) −24.23 12.50 12.07 −38.50 −33.56 −39.48 −23.74
Company C
A – Female calves until 1 month 7 €350 €2,100 €875 €700 €700 €1,050 €700 €1,050
B – Female calves from 2 to 6 months 9 €1,800 €2,700 €1,125 €900 €900 €1,418 €900 €2,925
C – Female calves from 7 to 12 months 1 €400 €300 €400 €400 €250 €350 €250 €460
D – Heifer calves from 13 to 18 months 0 €0 €0 €0 €0 €0 €0 €0 €0
E – Heiver calves from 19 to 24 months 0 €0 €0 €0 €0 €0 €0 €0 €0
K – Remaining animals’ lactation (W 85 m) 1 €600 €800 €1,250 €1,250 €600 €665 €350 €800
Total 113 €106,850 €81,900 €122,400 €122,000 €68,950 €66,658 €69,900 €81,235
Variation (%) −23.35 14.55 14.18 −35.47 −37.62 −34.58 −23.97
(continued )
Valuation
Company D
A – Female calves until 1 month 10 €500 €3,000 €1,250 €1,000 €1,000 €1,500 €1,000 €1,500
B – Female calves from 2 to 6 months 32 €6,400 €9,600 €4,000 €3,200 €3,200 €5,040 €3,200 €10,400
C – Female calves from 7 to 12 months 31 €12,400 €9,300 €12,400 €12,400 €7,750 €10,850 €7,750 €14,260
D – Heifer calves from 13 to 18 months 22 €19,800 €13,200 €22,000 €22,000 €7,700 €14,630 €7,700 €11,000
E – Heiver calves from 19 to 24 months 19 €22,800 €11,400 €19,000 €19,000 €11,400 €12,635 €11,400 €9,500
Total 259 €203,600 €162,500 €239,900 €238,850 €130,250 €141,080 €123,050 €162,660
Variation (%) −20.19 17.83 17.31 −36.03 −30.71 −39.56 −20.11
Notes: The biological assets inventories at the end of the reporting period of the four companies were measured using the different market-based valuation
criteria collected from the interviewees and the values established by SIMA. The animal’s classification bands were homogenized by the authors using the data
collected and protracted in the Appendix
Fair value
Table II.
239
75,2
240
AFR
Table III.
Impact on net
income statements
Valuation
criteria 1 criteria 2 criteria 3 criteria 4 criteria 5 criteria 6 criteria 7 (SIMA)
Company A
Measurement of biological assets €194,350 €162,600 €239,075 €238,000 €133,650 €131,355 €128,200 €160,480
Net income statement
Changes in the fair value €10,687 €42,437 €−34,038 €−32,963 €71,387 €73,682 €76,837 €44,557
Net income €8,049 €−23,701 €52,774 €51,699 €−52,651 €−54,946 €−58,101 €−25,821
Variation (%) −394 556 542 −754 −783 −822 −421
Company B
Changes in the fair value €−19,940 €9,760 €−35,265 €−34,740 €27,260 €21,208 €28,460 €9,165
Net income €−15,350 €−45,050 €−25 €−550 €−62,550 €−56,497 €−63,750 €−44,455
Variation (%) −193 100 96 −307 −268 −315 −190
Company C
Changes in the fair value €9,500 €34,450 €−6,050 €−5,650 €47,400 €49,693 €46,450 €35,115
Net income €−53,344 €−78,294 €−37,794 €−38,194 €−91,244 €−93,536 €−90,294 €−78,959
Variation (%) −47 29 28 −71 −75 −69 −48
Company D
Changes in the fair value €−112,500 €−70,950 €−148,350 €−147,300 €−38,700 €−49,530 €−31,500 €−71,110
Net income €94,639 €53,539 €130,939 €129,889 €21,289 €32,119 €14,089 €53,699
Variation (%) −43 38 37 −78 −66 −85 −43
Moreover, this methodology of fair value assessment only incorporates market Fair value
behaviors. The assessment of fair value should not only incorporate market behaviors,
but also other variables such as production efficiency indicators. In fact, NCRF
17 (Agriculture) establishes that fair value can also be assessed by the present value of
expected net cash flows from the assets discounted at a current market-determined rate
before taxes. The present study explores a new methodology to assess fair value based
on the NPV of dairy herds, incorporating market and production efficiency variables. 241
We believe that this methodology would lead to objective values, consistent with
production and animals’ characteristics, and consequently would allow an
improvement in the comparability and reliability of financial information across the
dairy sector.
Calculating NPV
The model we propose based on the NPV of the animals will allow us to obtain the
measure of Holstein Friesian milk-producing animals based on the future economic
benefits they will bring to the farm.
When we talk about dairy herds’ fair value, two aspects should be taken into
consideration: the production curve and the remaining variables which influence the
price of the animal. The market value of dairy herds is measured against the number of
liters of milk produced. Therefore, to assess the future economic benefits and then
proceed with the computation of the present value of these future cash flows we should
contemplate the following variables for each period of the animal’s useful life: milk
price, average production, timely production, feeding costs, and a representative
variable of exceptional factors, either positive or negative. The following formula
measures the value of an animal in the t period:
V At ¼ ðnu adp mpÞ ð f cc ðnu adp mpÞÞ þ ef
for t in which:
adp ¼ 0 ⩾ V At ¼ f c
where VAt is the value of an animal in the t period; nu the number of useful working
days in production; adp the average daily production in the t period; mp the milk
price in the t period; fcc the feeding costs contribution; fc the feeding costs and ef is the
exceptional factor.
The VAt represents the difference between the costs and the revenues the animal
will generate in that period. To implement this formula, it is essential to understand
the production curve of dairy herds, locate the animal in the milk production curve,
and proceed with its inclusion in the appropriate animal’s age classification band.
The animal’s age classification band takes into consideration the number of years of
the animal’s useful life. The animal’s useful life refers to the time the animal finds
itself in the farm and not to the total number of years of the animal’s life.
We considered eight years as being the cow’s useful lifespan, the existence of
six lactation periods, and 305 days as the average amount of days in production
for each lactation period. These data are consistent with previous herds’ valuation
studies (Smith, 1973).
Moreover, this measurement applies to female breeding animals, with the
assumption that all breeding females born in the farm are destined to milk
production and will be sold for culling only at the end of their useful life. Since birth
AFR until the beginning of milk production (such as female calves and heifer calves)
75,2 the measure of each animal in each period only reports to its feeding cost. Feeding is
the highest cost of dairy farms and it is proportional to milk production. As a result, the
value of these costs is a percentage of revenues. The feeding costs contribution
comprises 56 percent of milk value (Neto, 2009). Female calves daily feeding cost is
€1.16 and heifer calves daily feeding cost is €2. These figures were obtained from the
242 chartered accountant of Company A as referred previously, who also provided us with
the average daily milk production in each lactation period.
Extraordinary factors will not be considered. Consequently, factor ef is zero, once we
do not possess enough information to assess the exceptional specificities of each
animal. Table IV presents the computation of the VAt.
Table IV (Panel A) presents the estimation of milk prices throughout the eight
years of animal’s useful life. The price of cow’s raw milk in euros/100 kg in Portugal
suffered high variations in the last nine years (Eurostat, 2014b). Therefore, the
inflation rate used in the calculation of the future milk prices is the average
of inflation rates in Portugal over the last nine years (inflation rate ¼ 2.23 percent).
The milk price considered in Year 1 (milk price ¼ €0.3217/liter) is the market price
published by SIMA.
Table IV (Panel B) presents the estimation of the VAt. This value is computed for
each animal’s age classification band, after the classification of the animals at the
end of each reporting period. Therefore, Table IV (Panel B) shows the future
economic benefits generated by each animal in the next years of its useful life. The
animals in each band have specific years of useful life (female calves ¼ eight years;
heifer calves ¼ seven years; first lactation cows ¼ six years; second lactation
cows ¼ five years; third lactation cows ¼ four years; fourth lactation cows ¼ three
years; fifth lactation cows ¼ two years; and sixth lactation cows ¼ one year). The
item “average daily milk production (liters) in the t period” varies across the several
bands. This depends on the lactation stage the cow is actually in. For example, at the
end of the reporting period a cow classified as “first lactation cow” will produce
29 liters of milk per day in the next year (Year 1). On the other hand, at the end of the
reporting period, a cow classified as “sixth lactation cow” will produce 30 liters of
milk per day in the next year (Year 1).
The VAt formula does not incorporate the variable “animal’s selling price in the
n period” (n representing the number of years of animal’s useful life). We incorporate
this variable in Table IV (Panel B) to turn the computation of NPV easier. The NPV of
the animal corresponds to its VAt amounts discounted at a current market-determined
rate before taxes. The NPV formula considered is:
n1
X
V At V An þ spn
N PV A ¼ t þ
t¼1 ð1 þ i Þ
ð1 þ iÞn
where NPVA is the net present value of the animal; VAt, value of an animal in the
t period; i the return rate; n the number of years of animal’s useful life; spn is
the animal’s selling price at the n period.
The country-specific discount rate of 13.08 percent was used. This was the rate of
ten-year government bonds in December 2011, published in the Portuguese Central
banks statistical series (Portuguese Central Bank, 2014). Table V presents the
estimation of the NPV of the animal.
Sum Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Panel A – estimation of milk prices

Milk price in year 1 0.3217
Inflation rate (mean rate) 2.23%
Milk price for the t period (mp) €0.3217 €0.3289 €0.3362 €0.3437 €0.3514 €0.3592 €0.3672 €0.3754
Panel B – estimation of the value of the animal in the t period (VAt)

Female calves (1-12 months)
Number of useful working days in production (nu) 365 365 305 305 305 305 305 305
Average daily milk production (liters) in the t period (adp) 0 0 29 32 35 34 33 30
Milk price in the t period (mp) €0.3217 €0.3289 €0.3362 €0.3437 €0.3514 €0.3592 €0.3672 €0.3754
Feeding costs (fc) €1.16 €2.00 – – – – – –
Feeding costs’ contribution % (fcc) 56 56 56 56 56 56
Animal’s selling price in the n period (spn) €400.00
Value of the animal in the t period (VAt) €8,458.06 €−423.40 €−730.00 €1,308.45 €1,476.01 €1,650.38 €1,638.98 €1,626.25 €1,911.38
Heifer calves (13-24months)
Number of useful working days in production (nu) 365 305 305 305 305 305 305
Average daily milk production (liters) in the t period (adp) 0 29 32 35 34 33 30
Milk price in the t period (mp) €0.3217 €0.3289 €0.3362 €0.3437 €0.3514 €0.3592 €0.3672
Feeding costs (fc) €2.00 – – – – – –
Value of the animal in the t period (VAt): €8,680.52 €−730.00 €1,279.91 €1,443.81 €1,614.38 €1,603.23 €1,590.78 €1,878.41
First lactation cows (25-36 months)
Number of useful working days in production (nu) 305 305 305 305 305 305
Average daily milk production (liters) in the t period (adp) 29 32 35 34 33 30
Milk price in the t period (mp) €0.3217 €0.3289 €0.3362 €0.3437 €0.3514 €0.3592
Value of the animal in the t period (VAt): €9,213.97 €1,251.99 €1,412.32 €1,579.17 €1,568.26 €1,556.08 €1,846.16
Second lactation cows (37-48 months)
Number of useful working days in production (nu) 305 305 305 305 305
Average daily milk production (liters) in the t period (adp) 32 35 34 33 30
(continued )
value of the animal

Estimation of the
Fair value
Table IV.
243
75,2
244
AFR
Table IV.
Milk price in the t period (mp) €0.3217 €0.3289 €0.3362 €0.3437 €0.3514
Feeding costs’ contribution % (fcc) 56 56 56 56 56
Value of the animal in the t period (VAt) €7,797.03 €1,381.51 €1,544.72 €1,534.05 €1,522.13 €1,814.62
Third lactation cows (49-60 months)
Number of useful working days in production (nu) 305 305 305 305
Average daily milk production (liters) in the t period (adp) 35 34 33 30
Milk price in the t period (mp) €0.3217 €0.3289 €0.3362 €0.3437
Feeding costs’ contribution % (fcc) 56 56 56 56
Value of the animal in the t period (VAt): €6,284.30 €1,511.02 €1,500.59 €1,488.93 €1,783.76
Fourth lactation cows (61-72 months)
Number of useful working days in production (nu) 305 305 305
Average daily milk production (liters) in the t period (adp) 34 33 30
Milk price in the t period (mp) €0.3217 €0.3289 €0.3362
Feeding costs’ contribution % (fcc) 56 56 56
Value of the animal in the t period (VAt) €4,677.88 €1,467.85 €1,456.45 €1,753.57
Fifth lactation cows (73-84 months)
Number of useful working days in production (nu) 305 305
Average daily milk production (liters) in the t period (adp) 33 30
Milk price in the t period (mp) €0.3217 €0.3289
Feeding costs’ contribution % (fcc) 56 56
Value of the animal in the t period (VAt): €3,148.73 €1,424.68 €1,724.05
Sixth lactation cows (W85 months)
Number of useful working days in production (nu) 305
Average daily milk production (liters) in the t period (adp) 30
Milk price in the t period (mp) €0.3217
Feeding costs’ contribution % (fcc) 56
Value of the animal in the t period (VAt): €1,695.16 €1,695.16
Panel A – value of the animal in the t period (VAt)

Female calves (1-12 months) €8,458.06 €−423.40 €−730.00 €1,308.45 €1,476.01 €1,650.38 €1,638.98 €1,626.25 €1,911.38
Heifer calves (13-24 months) €8,680.52 €−730.00 €1,279.91 €1,443.81 €1,614.38 €1,603.23 €1,590.78 €1,878.41
First lactation cows (25-36 months) €9,213.97 €1,251.99 €1,412.32 €1,579.17 €1,568.26 €1,556.08 €1,846.16
Second lactation cows (37-48 months) €7,797.03 €1,381.51 €1,544.72 €1,534.05 €1,522.13 €1,814.62
Third lactation cows (49-60 months) €6,284.30 €1,511.02 €1,500.59 €1,488.93 €1,783.76
Fourth lactation cows (61-72 months) €4,677.88 €1,467.85 €1,456.45 €1,753.57
Fifth lactation cows (73-84 months) €3,148.73 €1,424.68 €1,724.05
Sixth lactation cows (W 85 months) €1,695.16 €1,695.16
Panel B – estimation of the net present values
Present-value interest factor for i ¼ 13.08% and n 0.8843297 0.782039 0.6915803 0.611585 0.5408427 0.4782833 0.422960101 0.37403617
Female calves (1-12 months) €3,941.55 €−374.43 €−570.89 €904.90 €902.70 €892.60 €783.90 €687.84 €714.92
Heifer calves (13-24 months) €4,763.65 €−645.56 €1,000.94 €998.51 €987.33 €867.10 €760.84 €794.49
First lactation cows (25-36 months) €5,987.49 €1,107.17 €1,104.49 €1,092.12 €959.12 €841.59 €882.99
Second lactation cows (37-48 months) €5,402.99 €1,221.71 €1,208.03 €1,060.92 €930.91 €981.42
Third lactation cows (49-60 months) €4,630.39 €1,336.24 €1,173.52 €1,029.71 €1,090.92
Fourth lactation cows (61-72 months) €3,649.80 €1,298.07 €1,139.00 €1,212.74
Fifth lactation cows (73-84 months) €2,608.16 €1,259.89 €1,348.27
Sixth lactation cows (W 85 months) €1,499.08 €1,499.08
of the animal
Estimation of the net
present value
Table V.
Fair value
245
AFR Table V (Panel A) presents a summary of the different cash-flows animals
75,2 are expected to generate in the near future. Table V (Panel B) shows the
NPV for each animal’s age classification band considering the following
present-value interest factor: (1+0.1308)−n. The NPV’s formula includes the
variable “SPn” (animal’s selling price at the n period). We decided to include
this variable in the VAt of the animal. In each Year n we incorporate the benefit of
246 selling the animal for culling. Culling price was €400, based on meat prices issued
by SIMA.
We chose to assess the NPV on an annual basis. To take due account of data on a
monthly basis, we would apply the formula in months or in days and would then
proceed with the discount rate adjustment.
With NPV we attain a more consistent measure of the animal. However, it should
be pointed out that each farm should use its historical data in terms of production
and cost indicators. The reference values may distort reality and market price is
protected not only by milk price but also by the animal price at the time of its selling
for culling.
Results from Table V (Panel B) show animal’s NPV considering the number of years
of the animal’s useful life. Table VI presents how the NPV can be used to value the
biological assets quantity at the end of the reporting period.
VI. Conclusion
The aim of this study was to assess the impact of the adoption of the Accounting and
Financial Reporting Standard 17 (Agriculture) in the dairy sector, imposed by
the new accounting frame of reference SNC, when it came into force in January 2010,
and explores the alternative mechanisms for valuing the animals required by the
accounting standard.
To fully understand the impact of this new accounting frame of reference, we
must first perceive what changed within it and what importance those changes
had. After reviewing prior literature, we prepared a case study, followed by a
presentation and comparison of results. The main conclusion is that the impact of
NCRF 17’s adoption in the Portuguese dairy sector is inconclusive, since financial
information among dairy farms is not comparable. Fair value establishes a direct
relationship between valuation and market prices. In Portugal, the measurement
Biological assets of
Animal’s Company A (31/12/2011)
Animal’s age classification bands NPV useful life (n) NPV/n Quantity Measurement
Female calves (1-12 months) €3,941.55 8 €492.69 46 €22,663.92

Heifer calves (13-24 months) €4,763.65 7 €680.52 0 €0.00
First lactation cows (25-36 months) €5,987.49 6 €997.91 43 €42,910.31
Second lactation cows (37-48 months) €5,402.99 5 €1,080.60 46 €49,707.54
Third lactation cows (49-60 months) €4,630.39 4 €1,157.60 41 €47,461.54
Table VI. Fourth lactation cows (61-72 months) €3,649.80 3 €1,216.60 21 €25,548.62
Net present value Fifth lactation cows (73-84 months) €2,608.16 2 €1,304.08 19 €24,777.51
and measurement of Sixth lactation cows (W 85 months) €1,499.08 1 €1,499.08 16 €23,985.34
biological assets 232 €237,054.80
of bovine animals is established by SIMA and animal traders. Dairy farms Fair value
use quoted market prices in an active market to assess fair value, using these
two kinds of sources of information. However, the valuation criteria from the two
sources are divergent, leading to inconsistent and non-comparable information.
SIMA does not furnish information on all age ranges and lactation periods
of dairy herds, creating a serious gap for those farms based on its market
prices. Consequently, there is a clear ambiguity in the measurement of one 247
of the assets which most contributes to the value of a dairy farm: the animals.
Although Portuguese dairy farms are using quoted market prices to measure dairy
herds, this sector evidences a disparate and unreliable market value of its
companies.
Results also support the study conducted by Paananen and Lin (2009), who refer
that the adoption of IFRS has made it harder for investors to take a decision.
Azevedo (2005) observes that the adoption of fair value contributed for the rising
of companies’ profits, but in the dairy sector all depends on which fair value is
attributed to biological assets. Like Aryanto (2011), we encountered distorted
financial information, which could promote misleading management decisions.
Similarly to Chen et al. (2013), it was noticed that fair value measurement is strongly
influenced by prices’ volatility, implying an extremely careful management and
affecting the results obtained in a substantial way.
Therefore, it would be urgent to achieve a model that would allow us to use the
frame of reference in a consistent and reliable way. We proceeded with the
development of a measurement model of dairy herds based on milk’s market price
and NPV of future cash-flows. A formula was then prepared and tested to calculate
the value of each animal. In our opinion, this is a possible method to measure bovines
that are in a breeding stage. We were sustained by the principle that if all
stakeholders in the sector apply the same criterion, it will be possible to compare
results and values of dairy farms. Comparability and reliability of financial
information promoted by the application of this valuation model would lead to
a better assessment of dairy farms’ business risk with the consequent impacts in
the cost of debt contracted with finance institutions, basically because it is not
influenced by market prices’ volatility, and incorporates production efficiency
characteristics of each dairy farm.
Despite the flexibility of the model, we are conscious that some adjustments might be
needed in the formula to allow for its application in any dairy farm. This subject should
certainly be further analyzed and improved. Future studies may ameliorate the model
which was formulated or even create new models for other agriculture activities.
We have no doubt that better results can only be attained with hard work and solid
cooperation.
Notes
1. The SIMA presents statistical and economic information on agro-food markets.
It develops the necessary efforts related to collection and analysis of technical and
economic data, either from national or regional level, on agro-food markets.
2. According to SIMA, not all groups of animals are measured. For example, animals from six to
eight months of age and from 12 months to breeding age are not contemplated. As for cows’
measurement, we only have one measure for breeding cows, with no differentiation in
lactation periods.
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de São Paulo de Controladoria e Contabilidade, 26-27 July, available at: www.congressousp.
fipecafi.org/artigos122012/207.pdf (accessed 22 March 2013).
Smith, B.J. (1973), “Dynamic programming of the dairy cows replacement problem”, American
Journal of Agricultural Economics, Vol. 55 No. 1, pp. 100-104.
(The appendix follows overleaf.)

75,2
250
AFR
Table AI.
Valuation criteria
Valuation criteria 1 Valuation criteria 2 Valuation criteria 3 Valuation criteria 3
Animals’ age Animals’ age classification Animals’ age Animals’ age
classification bands Price bands Price classification bands Price classification bands Price
Appendix
Female calves until 1 €50.00 Female calves until 1 year €300.00 Male/female calves €125.00 Male/female calves until 3 €100.00
month until 6 months months
Female calve from 2 to €200.00 Male calves until 1 year €250.00 Male/female calves €400.00 Male/female calves from 3 €400.00
6 months from 6 to 12 months to 12 months
Female calves from 7 €400.00 Heifer calves €600.00 Heifer calves/cows €1,000.00 Female calves from 12 €1,000.00
to 12 months from 12 to 24 months months till heifer calves
Heifer calves from 13 €900.00 Cows €800.00 Heifer calves/cows 24 €1,250.00 Cows €1,250.00
to 18 months months upwards
Heifer calves from 19 €1,200.00
to 24 months
1st lactation cows €1,200.00
(25m-36m)
2nd lactation cows €1,200.00
(37m-48m)
3rd lactation cows €1,000.00
(49m-60m)
4th lactation cows €900.00
(61m-72m)
5th lactation cows €600.00
(73m-84m)
Remaining animals’ €600.00
lactation (W 85)
Valuation Criteria 5 Valuation Criteria 6 Valuation Criteria 7 Valuation Criteria 8 (SIMA)
Animals’ age Price Animals’ age classification Price Animals’ age Price Animals’ age Price
classification bands bands classification bands classification bands
Male/female calves €100.00 Newborn male €50.00 Female calves until 1 €100.00 Newborn female calf €150.00
until 6 months calf Turina EUR/Unit month
(continued )
Valuation criteria 1 Valuation criteria 2 Valuation criteria 3 Valuation criteria 3

Animals’ age Animals’ age classification Animals’ age Animals’ age
classification bands Price bands Price classification bands Price classification bands Price
Male/female calves €250.00 Newborn female €150.00 Female calves from 2 €100.00 Female calf until 3 months €180.00
from 6 to 12 months calf Turina EUR/Unit to 6 months
Female calves from 12 €350.00 3 to 6 months female €157.50 Female calves from 7 €250.00 Female calf from 3 to 6 €325.00
to 18 months calf Turina EUR Unit to 12 months months
Female calves from 18 €600.00 8 to 12 months heifer €350.00 Heifer calves from 13 €350.00 Male/female calves from 8 €460.00
to 24 months calf Turina EUR Unit to 18 months to 12 months
Heifer calves 24 €700.00 Breeder cow Turina €665.00 Heifer calves from 19 €600.00 Breeders €800.00
months upwards EUR/Unit to 24 months
Cows €700.00 1st lactation cows (25- €750.00
36 m)
Cows with 84 months €600.00 2nd lactation cows (37- €750.00
upwards 48 m)
3rd lactation cows (49- €700.00
60 m)
4th lactation cows (61- €600.00
72 m)
5th lactation cows (73- €500.00
84 m)
Remaining animals’ €350.00
lactation (W85)
Fair value
Table AI.
251
AFR About the authors
75,2 Professor Jonas da Silva Oliveira is a Lecturer at the University of Aveiro, Portugal. He is a
Research Fellow at the IMARKE Research Center at the University of Minho His research focuses
on risk reporting. He is co-author of some research papers published in some international
journals.
Professor Graça Maria do Carmo Azevedo is a Lecturer at the University of Aveiro, Portugal.
She is a Research Fellow at the GOVCOOP Research Center at the University of Aveiro.
252 Her research focuses on Agricultural Accounting. She is author and co-author of some research
papers. Professor Graça Maria do Carmo Azevedo is the corresponding author and can be
contacted at: graca.azevedo@ua.pt
Professor Cláudia da Silva Amaral Santos is a Lecturer at the University of Aveiro,
Portugal. Her research has been centered on knowledge representation and terminology. She is
author and co-author of some research papers and book chapters published at national and
international level.
Dr Sandra Cristina Santos Vasconcelos has Master’s Degree in Accounting.
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Fair value: model proposal for the dairy sector

Article in Agricultural Finance Review · July 2015

Jonas Oliveira Graça Maria do Carmo Azevedo

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II. Agriculture and the accounting measurement criteria

Portuguese Biological assets shall be recognized Biological assets shall be measured at

III. Literature review

IV. Research method

V. Results of the case study

In order to better perceive the difficulties in comparing the financial information

Panel A – Market prices per animal (according to Appendix)

Sum Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

Panel A – estimation of milk prices

Panel B – estimation of the value of the animal in the t period (VAt)

value of the animal

Sum Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

Panel A – value of the animal in the t period (VAt)

Female calves (1-12 months) €3,941.55 8 €492.69 46 €22,663.92

PriceWaterhouseCoopers (PWC) (2009), Forest Industry: Application Review of IAS 41

(The appendix follows overleaf.)

Valuation criteria 1 Valuation criteria 2 Valuation criteria 3 Valuation criteria 3

Dr Sandra Cristina Santos Vasconcelos has Master’s Degree in Accounting.

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