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http://dx.doi.org/10.13106/jafeb.2022.vol9.no8.0071

Effects of the Fair Value of Biological Assets on the Cost of Debt: An International Study  

ERFAN, Neven (Department of Business Administration, Canadian International College, Department of Administrative Sciences, Applied College, Princess Nourah bint Abdulrahman University)
ALI, Ijaz (College of Business and Management, Fahad Bin Sultan University)
KHAN, Soha (Department of Accounting and Finance, College of Business Administration, Prince Mohammad Bin Fahd University)
KHAN, Imran Ahmad (Creative HeadsConsultants)
Publication Information
The Journal of Asian Finance, Economics and Business / v.9, no.8, 2022 , pp. 71-80 More about this Journal
Abstract
This study aims to investigate the effects of fair value valuation of biological assets and bearer plants measured at historical cost on the cost of third-party capital. The study contributes to the agricultural sector and the International Accounting Standard - IAS 41, which has been modified to remove the requirement to apply fair value for bearer plants, one of the primary biological assets with no active market. For this, 182 companies from 39 countries were studied in the years 2020 and 2021, with information taken from the Thomson Reuters Eikon platform. The methodology involves regression by the ordinary least squares method based on the model of Daly and Skaife (2016). The results show that the biological asset at fair value does not influence the cost of debt and that the measurement of bearer plants at historical cost has no effect on the cost of debt. Fair value did not change the perceived cost of debt of the analyzed companies in the studied period, contrary to Daly and Skaife (2016). Finally, the cost of third-party capital can be influenced by other aspects related to profit quality, which were not examined in this paper, such as profit management.
Keywords
Biological Assets; Cost of Debt; Fair Value;
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