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Source: Journal Citation ReportsTM from ClarivateTM 2022

Entrepreneurship and Sustainability Issues Open access
Journal Impact FactorTM (2022) 1.7
Journal Citation IndicatorTM (2022) 0.42
Received: 2018-03-12  |  Accepted: 2018-05-05  |  Published: 2018-09-30

Title

Historical cost vs fair value in forest accounting: the case of Lithuania


Abstract

The accounting methods based on two concepts - accounting at historical cost and accounting at fair value - are responsible for the provision of information about the enterprise’s assets in the financial statements. Taking into consideration the specifics of the national financial accounting regulation, the forests managed by the forestry enterprises can also be measured by using either of these two accounting methods. However, in terms of accounting, both of them pose certain problems or ambiguity. The purpose of the research is to evaluate the strengths and weaknesses of forest accounting methods based on fair value and historical cost and the practice of their use in Lithuanian forestry enterprises. The study examines scholarly literature and deploys the theoretical methods of comparative analysis, critical evaluation, systematisation, generalisation. The empirical research involved document content analysis, questionnaire survey. The article deals with the issues of the use of accounting methods for forestry accounting: traditional cost-based accounting methods do not reflect the biological forest transformation, hinders identifying the forest development costs and the end of their capitalisation, the method of a systematic derecognition. On the other hand, the essential complication of the use of the fair value method is that the forest largely lacks an active market with quoted prices. Thus, its fair value is determined on the basis of rather subjective assumptions by means of diverse valuation methods, resulting in unreliable and unverifiable information. The results of the research carried out into the forestry accounting policy observed in the Lithuania’s private forestry enterprises revealed that forest accounting by cost is exclusively carried out by all the enterprises under investigation. Nevertheless, the method itself was interpreted quite differently. The article presents the modified forestry accounting methods by cost, which allow reducing the identified shortcomings.


Keywords

forest (stands), accounting methods, fair value, historical cost


JEL classifications

M41


URI

http://jssidoi.org/jesi/article/208


DOI


HAL


Pages

60-76


This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License

Authors

Budrionytė, Ramunė
Vilnius University, Vilnius, Lithuania https://www.vu.lt
Articles by this author in: CrossRef |  Google Scholar

Gaižauskas, Lionius
Vilnius University, Vilnius, Lithuania https://www.vu.lt
Articles by this author in: CrossRef |  Google Scholar

Journal title

Entrepreneurship and Sustainability Issues

Volume

6


Number

1


Issue date

September 2018


Issue DOI


ISSN

ISSN 2345-0282 (online)


Publisher

VšĮ Entrepreneurship and Sustainability Center, Vilnius, Lithuania

Cited

Google Scholar

Article views & downloads

HTML views: 4764  |  PDF downloads: 2158

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