Factors influencing biological asset disclosures in agricultural companies in Indonesia

Abstract

This study examines to what extent biological asset reporting is corresponding to the Indonesian Statement of Financial Accounting Standard 69 (PSAK 69) among Indonesia Stock Exchange-listed agricultural firms. In their annual report, such companies should report how they recognize and measure the fair value of the living plants or animals’ assets. This study also examines factors that might impact the extent of disclosure of biological assets. The examined factors are biological asset intensity, concentrated ownership, audit committee effectiveness, profitability, and size. Biological asset disclosures were measured by a checklist derived from PSAK 69 and International Accounting Standard (IAS) 41 on Agriculture. This study uses 53 firm-year observations of the listed agriculture companies from 2017 to 2020. Multiple regression analysis findings indicate that biological asset intensity and firm size affect favorably the amount of biological asset disclosures. The results indicate that the greater the living plants or animals owned by a company and the larger the firm, the greater the commitment of a company to disclose its biological assets in its annual report. The study sheds light on the capital market authority agency’s current policy to strengthen factors that may impact agricultural companies’ disclosure of their biological assets.

Biological Asset Disclosure: A Study on Agricultural Companies in Indonesia

“…Several studies on the determinants of biological asset disclosure have been conducted before. One factor that is widely studied is the intensity of biological assets (Carolina et al, 2020;Ika et al, 2022;Istutik & Ainun, 2021;Kartikasari et al, 2021;Nikmah et al, 2022;Zufriya et al, 2020). The intensity of biological assets shows is supported by stakeholder theory.…”

“…The object of research is an agricultural company listed on the Indonesia Stock Exchange (BEI) for the period 2005-2021. The company size variable was also used as a controlling variable in this study by adopting the study Ika et al (2022). The larger the company, the higher the tendency of company management to disclose its biological assets to accommodate various stakeholder interests.…”

“…The larger the company, the higher the tendency of company management to disclose its biological assets to accommodate various stakeholder interests. The result from Ika et al (2022) shows that the company's size positively influences the disclosure of biological assets.…”

The impact of biological asset disclosures and economic sustainability on firm value: Evidence from agricultural companies in Indonesia

“…To what extent accounting information influences stock prices and, in turn, investors' decisions is the primary focus of value-relevance studies [10]. Researches on biological asset may be categorized in two main broad theme: determinants the extent of biological asset reporting [11][12][13]; and the value relevance of biological asset and biological asset disclosure [8], [10], [14][15][16][17]. Studies that explored the value relevance of biological assets measured at fair value and the disclosure of biological assets show inconsistent results.…”

“…This study expands upon prior research on value relevance by examining the impact of economic sustainability, specifically in relation to the value relevance of biological asset disclosure. The terms economic sustainability refers to the probability of bankruptcy as measured by Altman Z-score rating [24,25]. According to Altman [26], Z-score reflects the financial healthiness of a firm, where the higher the score, the healthier the firm, and hence the more confident the company is in maintaining its sustainability.…”