IAS 41 and the forest industry - A study of the forest products companies' perception of the IAS 41 today

Abstract

Background and Problem – Europe today is facing an accounting standardization movement, in an attempt to harmonize and internationalize the accounting systems. One step in the process is the implementation of the IAS/IFRS on January 1st 2005. “IAS 41 Agriculture” covers the primary sector and introduces a fair value model to agricultural accounting. IAS 41 will particularly impact those agricultural activities where the income-producing biological assets are expected to have economic lives that stretch beyond one accounting period. When all of the above is happening to the forest product companies it is a great opportunity to conduct a study of what the companies really think about the IAS 41 today. This paper aims to study; What is the forest products companies’ perception of the IAS 41 today? Purpose – The purpose of this thesis is to examine what the forest products companies really think about the IAS 41. The secondary purpose is to see what the firms and the auditor think is valued most of reliability and relevance. Delimitation - The study is deliminated to conducting interviews with forest product companies on the stock market in Sweden. Method - The strategy used in this study was interviews which is a qualitative analyze method. The study had a descriptive approach, since it concentrates on trying to describe the actual situation around the problem rather than interpreting and solving it. Primary data was gathered through interviews with target persons that possess the demanded knowledge and experience concerning the problem area. Three representatives for the forest products companies and one auditor were interviewed. The kind of interviews used was the semi-structured, with open questions exclusively. Conclusions - The common opinion is that IAS 41demands a lot of extra work and that it is harder to present the value of the forest now then prior to the IAS 41. Further, that it is hard to establish the fair value. The valuing method used is exclusively discounted net cash flow. The calculation is done by the following 100 years. The companies are still discussing how to handle the IAS 41 in their financial reports. The changes in value effects the result and makes it vary more, and the companies do not know how to work with that.