Abstract
The paper assesses the extent to which Malawian agricultural entities are complying with recognition and measurement requirements of IAS 41-Agriculture, for their agricultural produce and biological assets. The purpose of the paper is to investigate the extent to which Malawian agricultural entities are using the fair value accounting model proposed in IAS 41 for measuring their agricultural produce and biological assets; to establish the most common method utilized for measuring the agricultural produce and biological assets; and to identify the implementation challenges that agricultural entities face in complying with IAS 41, in particular, the determination of fair value. Questionnaires were used to collect the data. Thirty-two participants from Eastern Produce Malawi Limited and Sable Farming Limited participated in the research. Purposive sampling was used to identify the participants to the study. The findings indicate that most Malawian Agricultural entities recognize and measure their biological assets in accordance with IAS 41. However, there are challenges particularly with the determination of fair value. The findings indicate that most agricultural entities measure their agricultural produce and biological assets at fair value less estimated cost of sale at the point of harvest and fair value respectively. It was also established that present value of estimated future cash inflows is the most utilized method to determine the fair value of assets that are biological in nature. Key words: Biological assets, fair value, recognition, agriculture produce, disclosure.
Highlights
Malawi, as the warm heart Africa is best known for its friendly people and its lake which covers 20% of the country
The purpose of the paper is to investigate the extent to which Malawian agricultural entities are using the fair value accounting model proposed in International Accounting Standard (IAS) 41 for measuring their agricultural produce and biological assets; to establish the most common method utilized for measuring the agricultural produce and biological assets; and to identify the implementation challenges that agricultural entities face in complying with IAS 41, in particular, the determination of fair value
The findings indicate that most agricultural entities measure their agricultural produce and biological assets at fair value less estimated cost of sale at the point of harvest and fair value respectively
Summary
As the warm heart Africa is best known for its friendly people and its lake which covers 20% of the country. Agriculture has, for the past decade, been the mainstay of the Malawian economy It continues to be a fundamental instrument for sustainable development and poverty reduction in Malawi (Mucavele, 2010). The main agricultural exports in the country are tobacco, tea, sugar, cotton, rice, and pulses (Mucavele, 2010). Cotton, tea, sugar, and tobacco are the principal cash crops (Manda and Makowa, 2012). Tobacco is the dominant cash crop in the economy accounting for approximately 63% of the country‟s total export earnings. Tobacco is the most important cash crop in Malawi contributing 63% to export earnings followed by tea at 8% and sugar at 7%. Livestock production, which contributes about one-fifth of the value of total agricultural production, consists mainly of subsistence grazing of sheep, cattle, goats, poultry and pigs (WTO, 2010)
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