Is Accounting for Agricultural Asset Applicable in Indonesia?

Abstract

The study aimed to discuss underlying reason why the national agricultural industry, dominated by small and middle sector, did not establish a standardized accounting for agricultural assets instead of adopting IASB accounting system. This new standard would become a better fit for the culture and characteristics of the national agricultural sector. The study used critical paradigm because until recently Indonesia has not adopted IAS 41 yet and as the consequence, there was not any document that recorded biological assets of the livestock industry comprehensively. As an agraris country, Indonesia should establish standardized accounting system for agricultural asset. The finding showed that the national agricultural asset was regulated in an accounting standard that had worked effectively since January 1, 2018. This standardized accounting system adopted IAS 41 accounting system. However, IAS 41 only worked for large-scale agricultural industry and did not work as effectively for the small and middle-scale agricultural industry Indonesia had. The major obstacle was to establish fair value, more particularly one for reliable measurement. Establishment and adoption of standardized accounting system should take local culture and wisdom into account. It is expected that the National Standard Establishment Board's idea to adopt IAS 41 does not lead to new capitalism since evidence showed potentials for nepotism between actors of the agricultural industry. KEY WORDSFair value, historical cost, agricultural assets, IAS 41.The study focuses on the lack of financial accounting standard for the national agricultural asset. As an agraris country, Indonesia has currently implemented "Standar Akuntansi 69," an accounting system adopted from IAS 41 on January 1, 2018 after a twoyear delay. Standardized harmonization is the reason for the adoption of IAS 41 in PSAK 69. Based on study of the Institute of Chartered Accountants of Scotland (published in February 2011), once the system was implemented, IAS 41 had various drawbacks (Aryanto, 2011). Elad ( 2004) stated that IAS 41 was controversial because it showed the most radical and comprehensible distinction of fair value accounting and thus, caused both theoretical and practical issues. This distinction may be seen in value of company's assets, revenues and profit among others. Elad (2004) also explained that using subjective assesment in fair value estimation, for example similar asset market prices or the use of current value models, would result in different treatments which may inhibit comparability and harmonization. Furthermore, Herbohn and Herbohn (2006) and Dowling and Godfrey (2001) emphasized on increase in volatility, manipulation and subjectivity from reported income based on fair value.Another purpose of the adoption of IAS 41 into PSAK 69 is standard harmonization. Some studies showed crtiticsm towards standard harmonization that similar accounting standard worked in all countries. Mulawarman (2012) and Rodrigues and Craig (2007) described hegemony of nation thro...

Biological Asset Disclosure in Indonesia

“…Several countries that have implemented IAS 41 agriculture have difficulty in measuring the fair value of some biological assets, so it isn't worth the benefits received (Dewi et al, 2018). After examining the annual reports of several agricultural companies listed on the Indonesia Stock Exchange in 2018-2020, many agricultural companies haven't fully disclosed their biological assets .…”