Corporate Social Responsibility and Environmental Management Corp. Soc. Responsib. Environ. Mgmt.

16, 155166 (2009) Published online 30 March 2009 in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/csr.190

The Achievability of Sustainable Reporting Practices in Agriculture

Belinda R. Williams* and Trevor Wilmshurst
School of Accounting and Corporate Governance, University of Tasmania, Locked Bag 1314, Launceston, Tasmania, 7250 Australia

ABSTRACT This research investigates the process of change in moving from a domestic accounting standard, AASB 1037, relating to self-generating and regenerating assets (SGARAs) to an international standard, AASB 141. It focuses on the achievement (or nonachievement as it may be) of sustainable reporting practices for these agricultural assets. This paper nds that the transition to AASB 141 has allowed rms the discretion to change how they value their agricultural assets in comparison to the domestic standard. Consistency may have been achieved to a limited extent with the introduction of this nancial accounting standard but comparability appears not to have been. Further, there is very limited understanding of the reporting of these assets from a users perspective. It is concluded that this lack of consistency, comparability and understandability will not help achieve sustainability in the reporting practices of agricultural assets. Copyright 2009 John Wiley & Sons, Ltd and ERP Environment.
Received 17 May 2008; revised 1 November 2008; accepted 7 November 2008 Keywords: agricultural assets; consistency; comparability; sustainable reporting

Introduction

HIS PAPER FOCUSES ON THE REPORTING REQUIREMENTS OF AGRICULTURAL ASSETS IN AUSTRALIA AND THE

achievement (or nonachievement as the case may be) of sustainable reporting practices. Following the development of AASB 1037, formal measurement and disclosure reporting requirements have been in place for self-generating and regenerating assets (SGARAs1) within Australia since 2001. This domestic standard was largely incorporated into the International Accounting Standard on Agriculture (AASB 141) that was adopted in Australia from 1 January 2005. At the time of development, AASB 1037 was seen to be a controversial, if not revolutionary, step in identifying how businesses that held agricultural assets were to account for their productive effort (Moodie, 2000). It was believed that such a standard would help to bring about consistent and comparable nancial reporting practices (Roberts et al., 1995) resulting in higher levels of accountability; as such, taking a step towards sustainability reporting practices for living assets by raising the standard of and quality of information reported to stakeholders.

* Correspondence to: Belinda R. Williams, School of Accounting and Corporate Governance, University of Tasmania, Locked Bag 1314, Launceston, Tasmania, 7250 Australia. E-mail: Belinda.Williams@utas.edu.au 1 SGARAs are dened as non-human living asset (AASB 1037, para. 10.1.2, 1998). Examples include plantation timber, vineyards, livestock and orchards.
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Previous research has focused on the measurement methods that were adopted prior to the introduction of the domestic accounting standard, AASB 1037 (Roberts et al., 1995; Herbohn et al., 1998; Herbohn and Herbohn, 1999; Dowling and Godfrey, 2001); the measurement methods that were adopted by rms in applying AASB 1037 in reporting (Moodie, 2000; Hone et al., 2001; Booth and Walker, 2003; Milne, 2004; Herbohn, 2006, Williams and Wilmshurst, forthcoming); and the measurement methods adopted prior to the implementation AASB 141 (Williams and Wilmshurst, forthcoming). To date there has been little research undertaken into issues of concern raised (Roberts et al., 1995) regarding the consistency and comparability2 of the measurement of SGARAs and in the movement from AASB 1037 to AASB 141. The former has been addressed in the context of AASB 1037 by Williams and Wilmshurst (forthcoming) but no known research has addressed these issues in view of AASB 141. This paper will ll a research gap in terms of exploring consistency and comparability of measurement in the context of AASB 141, and the issues surrounding the transition from AASB 1037 to AASB 141. In this context the contribution of reporting under this standard to sustainable reporting is explored. Emphasis will be on the measurement methods utilized under AASB 141 and consideration as to whether consistency, comparability and understandability have been or will be achieved through this agricultural standard, and whether a contribution can be expected towards improved sustainability reporting practices. This study explores the following questions: Has consistency and comparability in accounting practice been achieved with the implementation of ASSB 1037 and the subsequent adoption AASB 141; do stakeholders understand the reporting of these living assets in nancial reports; and does such a standard contribute to improved sustainability reporting? Prior to the introduction of formal accounting regulations, there was a lack of guidance provided by accounting regulators and the accounting profession in accounting for agricultural assets in Australia. This resulted in a wide diversity of practices being adopted in terms of recognition, disclosure and measurement in general purpose nancial reports (Roberts et al., 1995) which created comparability and consistency issues in the preparation of nancial information. In terms of sustainable reporting, a consistent approach should enhance an understanding of change in the numbers/volumes of living assets, and for example, the contribution to an improved or deteriorating contribution to climatic change associated with change in forest levels, or associated environmental impacts expected as a result of changing animal numbers. If consistent reporting practices are adopted, comparability across time, and between and across industries becomes achievable. The paper is structured as follows. A review is undertaken of the processes surrounding the development of the domestic standard, AASB 1037 followed by issues surrounding the change to the international standard AASB 141 are discussed. A review of existing literature is then conducted followed by a discussion on the research method approach adopted in this study. The results are explored with a concluding discussion including limitations of this study.

Development of an Accounting Standard An Overview

In 1995, to overcome the lack of guidance in accounting for agricultural assets, the Australian Accounting Standards Board and the Public Sector Accounting Standards Board (the Boards) commenced the due process of developing an accounting standard (Discussion Paper 23) (Roberts et al., 1995). The Boards objective in releasing Discussion Paper 23 was to stimulate debate amongst those with an interest in the nancial reporting of SGARAs by identifying and analyzing issues relating to nancial reporting for such assets (Roberts et al., 1995). The Boards achieved this objective as accounting for SGARAs was seen as a revolution in the way many businesses would have to account for their SGARA activities (Moodie, 2000). This Discussion Paper was followed by an Exposure Draft (ED 83) in August 1997 and then the standard, AASB 1037, in August 1998. The standard, AASB 1037/AAS 35 Self Generating and Regenerating Assets, approved on 6 August 1998, retained the basic structure and content of ED 83 (AASB 1037, para. 7). The standard was to be operative for reporting periods ending on or after 30 June 2000 but could be applied earlier by rms. The Boards provided a two-year
2 To achieve consistency and comparability, the measurement and display of transactions need to be carried out in a consistent manner throughout an entity, and over time for that entity and in a consistent way for different entities (AASB Framework, para. 39, 2004).

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time lag between the issue of the standard and the operational date of the standard to ensure that rms understood and could implement the new standard requirements correctly. The Boards were advised prior to the operative date that some constituents were encountering practical implementation problems in implementing AASB 1037. They were having problems understanding the new rules and needed additional time to determine how they were going to gather the necessary information required to implement the requirements under the standard (Ravlic, 2000). In this sense, rms appear to have had issues seeking to identify how to modify recording practices within their rms to report information about SGARAs. These delays had implications for the reporting of information, which would allow readers to obtain better insights into the sustainability practices of the rm compared to others within the industry, and perhaps others in similar industries emitting, for example, similar gases as is the case of living animals. In July 1999, the Boards, in response to this advice, delayed the commencement date by one year (AASB 1037A, para. 3.1(a), 1999) to 30 June 2001. With the adoption of international standards from 1 January 2005, AASB 1037 has now been effectively replaced with AASB 141 Agriculture. Issues surrounding this change are now discussed and differences between the two standards as they relate to agricultural assets are identied.

Development of the International Standard

From 1 January 2005, the international standard (IAS 41) equivalent AASB 141 replaced the SGARA standard, AASB 1037, in Australia. Applicable entities are now required to meet the requirements of this international standard. Whilst AASB 1037 formed the basis of IAS 41, there are some major differences between the two standards.

Denition
AASB 1037 focused on the recognition, measurement and disclosure of SGARAs whilst AASB 141 focuses on agricultural activities rather than SGARAs. The standard refers to agricultural activities as the management of the transformation of biological assets for sale, into agricultural produce or into additional biological assets as considered in paragraph 5 of AASB 141. Biological assets are dened as living animals or plants (AASB 141, para. 1, 2003). To be subject to the standards requirements, the assets must relate to agricultural activity (AASB 141, para. 1, 2003). In comparing the denition of biological assets to the SGARA denition under AASB 1037 SGARAs were dened in general terms as nonhuman living assets (AASB 1037, para. 10.1.2, 1998) whilst AASB 141 is more restrictive specically excluding nonhuman living animals and plants that do not relate to agricultural activity, and nonhuman living assets other than plants and animals (AASB 141, para. A1, A2, 2003). By providing restrictions, AASB 141 has allowed for a clearer denition of who can apply the standard with the effect of excluding a number of Australian companies that had previously utilized AASB 1037 but were not in the agricultural industry. For example, this included such companies as Earth Sanctuaries Limited (ESL), being a public company involved in the breeding and preservation of fauna (Hone et al., 2001; Raar et al., 2002).

Reliability Presumption
AASB 1037 prescribed that SGARAs were to be measured at their net market value (para. 4.1, 1998). The net market value of a SGARA was dened (para. 10.1) as the amount which could be expected to be received from the disposal of the SGARA in an active and liquid market after deducting costs expected to be incurred in realizing the proceeds of such a disposal. AASB 141 prescribes that biological assets are to be measured at fair value less estimated point-of-sale costs (para. 12 and 13, 2003) except in the case where the fair value cannot be measured reliably. This exception is known as the reliability presumption and is considered a key difference between the two standards. Under AASB 1037 there was no such presumption.
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The reliability presumption under AASB 141 prohibits the use of fair value accounting where the fair value of the biological asset is not available. Under AASB 141 (para. 8, 2003), the fair value is dened as the amount which could be exchanged or a liability settled between knowledgeable, willing parties in an arms length transaction. The meaning of this term is identical to that of the term net market value under AASB 1037 (para. 10.1, 1998). Thus, fair value equates to net market value. This presumption (AASB 141, para. 30, 2003) can be rebutted only on initial recognition of a biological asset where market determined prices are not available and for which alternative estimates of fair value are seen to be unreliable. Where this occurs, the biological asset is to be measured at cost. In contrast to AASB 141 it was assumed under AASB 1037 that the net market value of SGARAs could always be reliably measured (Appendix A.4, 2003). Previous research in this area of nancial accounting is now discussed.

Consistency and Comparability in Measurement

Pre-Implementation AASB 1037 Lack of Consistency and Comparability in Measurement
Literature prior to the implementation of the domestic standard, AASB 1037 focused on the measurement methods that were being utilized by rms in valuing their living assets and sought to identify what might happen once the standard became operational. Key studies included Herbohn et al. (1998), Roberts et al. (1995), Herbohn and Herbohn (1999), and Dowling and Godfrey (2001). These studies all concluded that considerable diversity, lack of consistency and comparability existed in the measurement methods being utilized by the sample rms and that to ensure compliance with the standard, changes would need to be made to existing practices.

Post-Implementation AASB 1037 Studies Mixed Results

Whilst there have been relatively few studies that have considered consistency and comparability, those that have generally yielded mixed results in regards to the achievement of consistency and comparability in reporting practices. Booth and Walker (2003) examined the measurement methods utilized by ve major and two smaller listed wine producers in Australia. They found that very few disclosures were provided by these rms, in that any signicant assumptions underlying the calculations were not provided. They concluded that the application of this standard has resulted in false or misleading nancial statements, a reduction in the understandability of relevant nancial information and the inability to undertake accurate comparisons of the nancial performance for winemakers. Milne (2004) found that there was widespread disdain for the accounting standard amongst corporate and accounting rms. Other ndings included the lack of soundness with the theoretical foundations and analytical bases of the standard and the inability to meet the qualitative characteristics of the standard, namely relevance, understandability, reliability and comparability. Herbohn (2006) conducted a review that focused on two main issues: (i) the income statement effect of including changes in SGARA values and (ii) the valuation methods used to value SGARAs. The study found that accounting for SGARAs had a signicant effect on the reported net prots of rms complying with AASB 1037 and that these rms used a variety of methods with the net present value method being the most favoured. Williams and Wilmshurst (forthcoming) examined whether consistency and comparability has been achieved through the introduction of AASB 1037. The study found that consistency in measurement methods has not been achieved through the introduction of prescribed accounting methods under AASB 1037. However, they did nd consistency in methods over time and consistency in type of measurement methods for certain SGARA types (native forests and plantation timber) did appear to have been achieved, and consequently a degree of comparability to be achieved. On related issues to consistency and comparability, Moodie (2000) found these rms who were early adopters of the requirements of AASB 1037, to be accepting of and accounting for SGARAs on a voluntary basis in accordance with the standards requirements prior to its formal implementation date.
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Williams and Wilmshurst (forthcoming) sought to determine if consistency and comparability would be achieved on implementation of the international standard, AASB 141. It was found that rms expected to utilize a number of different measurement methods in applying the standard with a small percentage using the method prescribed under the standard. They concluded it appeared that consistency and comparability may not be achieved under AASB 141 but further research was required once AASB 141 was implemented. There is no known research that has examined measurement choice in the application of this standard.

AASB 141 Contributing to Sustainability Reporting?

In an age where stakeholders would appear to be increasingly concerned with reports that highlight not only the nancial/economic achievements of the rm but also the social and environmental aspects of their performance, will AASB 141 requirements contribute to this effort? In effect by increasing the consistency, comparability and understandability of reporting for agricultural assets, users understanding of living assets within the rms will be enhanced, and the accountability of the rm demonstrated. However, in terms of the treatment of these living assets, their subsequent expansion, harvesting and impact on the environment will not be enhanced by the standard. It could be argued then that reporting requirements under AASB 141 remain insufcient. This study extends current research by examining the transition from the domestic standard, AASB 1037 to the international standard, AASB 141 and discusses whether this standard has the ability to enhance attention toward sustainable reporting through consistent, comparable and understandable reporting.

Research Method
To allow for an in-depth analysis of the issues involved in this study, an interview strategy was adopted. The study was conned to two main industries within Australia, the winery and grapevine industry (wine industry) and the forestry and timber industry (forestry industry). These two industries were of interest because they have continually voiced their opposition to accounting for SGARAs under the standard. With such opposition, it was expected that these two industries would have been affected in some manner by the introduction of AASB 1037 and more recently by the introduction of AASB 141. In an examination of the submissions received from ED 83, these two industries were considered active in their opposition to the introduction of an agricultural asset standard (ED83 Submission File, 1998). In examining the 46 responses from ED 83, a large proportion of the submissions received from industry groups were from these two industries.3 The negative feelings of these two industry groups toward the imposition of an accounting standard in this area are clearly expressed in parts of their submission. For example; . . . we do not support the exposure draft on grounds of both principal and practical application . . . BRL Hardy Limited . . . strongly recommends that the Board re-examines the concept of applying net market value to these assets . . . Southcorp Limited . . . The ability to determine the net market value of SGARAs such as plantations and other forestry assets is considerably more subjective and potentially more volatile than the majority of other SGARAs . . . Amcor Limited Since ED 83, these two industries have continued to voice their opposition and have been relentless in attempting to bring to the AASB and the publics attention the issues and problems that they believe the move to accounting for SGARAs has caused. They remain at the forefront opposing the standard today. For example, Fosters Group Limited, in responding to the International Exposure Draft 114 (Exposure Draft 114: Submissions File, 2003) requested that the wine industry be excluded from any future standard requirements. Based on four years
3

Seventy-two percent of total responses from agricultural rms were received from rms within the wine or forestry industry. Corp. Soc. Responsib. Environ. Mgmt. 16, 155166 (2009) DOI: 10.1002/csr

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experience with meeting the reporting requirements of AASB 1037, Fosters considered that the accounting requirements and valuation concepts of AASB 1037 when applied to the wine industry were too onerous for the average user, making it impossible for users to understand the reporting of such assets.

Interview Sample Selection

The sample comprised listed companies and state public authorities who were required to comply with the requirements of AASB 1037/AAS 35. Information was sought from the Australian Stock Exchange (ASX) website as this contains all Australian listed public companies. To identify relevant companies for this study, details of companies under the GICS industry grouping of Food, Beverage and Tobacco and Materials were obtained. This provided a listing of 55 and 408 public companies respectively. Each of these companies was then examined to determine their principal activity, as provided to the ASX. Those companies that were found to have a principal business activity of wine production and/or forestry were included in the sample selection. The forestry industry includes a number of state public authorities which are required to comply with the AAS 35 requirements. These rms were included in the sample selection as a major part of the industry group. This provided a total population of 35 rms, split into 19 wine and 16 forestry companies. From this total, the interview subjects were chosen by utilizing purposeful sampling (Patton, 1990). Initial contact was made to selected participants in October 2005 to determine their willingness in participating in the interview process. Two rms one rm from each industry (hereafter referred to as Corporation A and Corporation B) agreed to be interviewed. Interviews, held in December 2005, were conducted at the participants business premises. Interviews were conducted utilizing a standardized open-ended interview technique (Patton, 1990).

Results
The research question examined the achievement (or nonachievement) of consistency and comparability, the understandability of the reporting of living assets and the contribution towards improved sustainability reporting. It focused on the transition by the interviewee rms from the domestic accounting standard, AASB 1037, to the international standard, AASB 141.

Measurement Methods Adopted in Applying AASB 141

Measurement methods being utilized by the two interviewee rms were discussed in the context of the application of AASB 141. These methods were then compared against the measurement methods that the interviewee rms had utilized under the previous standard, AASB 1037, to determine if consistency and comparability has been achieved on implementation of this standard. In conducting the interviews, it was found that major changes had occurred in how rms measured their living assets under the international standard in comparison to the previous domestic standard.

Corporation A
Corporation A had previously valued its SGARAs utilizing the net present value approach under AASB 1037. However, on transfer to AASB 141, the standard allowed the corporation some discretion to change valuation practices. With the implementation of AASB 141 from the 2005 year, Corporation A changed from valuing its native forest asset as a SGARA under the previous standard AASB 1037, to valuing it under a different standard altogether AASB 116 Property, Plant and Equipment. Corporation A decided to change the valuation method after considering the requirements of AASB 141. Due to two main factors, it determined that the native forest asset was more in the nature of property, plant and equipment rather than a biological asset:
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(a) The biological growth of native forests occurs up to and beyond 80 years. Therefore the biological growth requirement under AASB 141 is difcult to measure. (b) The main drivers of change in value are related to changes in the discount rate, in stumpage prices and costs associated with forest management, changes in the area of the forest and volumes to be harvested, environmental impacts and losses through wildlife (Tasmanian Audit Ofce Report, 2005). Corporation A justied valuing this asset under AASB 116 on the basis that it is the only other logical standard relating to assets. On consideration of the standard this treatment does not appear to be appropriate. Under paragraph 6 (AASB 116, 2004) property, plant and equipment is dened as tangible assets that: (a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and (b) are expected to be used during more than one period. Corporation A argued this change in valuation methods was validated as its native forest assets met the above denition in that the assets are held to be used in the production of goods once they reach maturity. Further, the trees were expected to be used for more than one period (that is, they are held by the rm to regenerate). This change in accounting standards was formally approved by the rms auditors. Although Corporation A justied its choice, in paragraph 4 (AASB 116) it clearly states that the standard does not relate to biological assets related to agricultural activity. As the native forest asset was valued as a SGARA under the previous standard, Corporation As arguments in valuing the asset under AASB 116 appears to be weak. The asset would appear to be a biological asset and should be valued as such.

Corporation B
During the transition to the international accounting standard, Corporation B made a major acquisition (Corporation C) which compounded its decision as to what measurement methods would be utilized to value its biological assets. With the acquisition of Corporation C in early 2005, the end result was that Corporation B and C had utilized two differing valuation methodologies to value grapevines under AASB 1037. Corporation B had utilized an independent valuation approach while the acquired Corporation C had utilized a net present valuation methodology. As considered by the interviewee: We had a comparability issue between the two rms. We had half the rm doing it one way and the other half doing it another way. On transition to the international standard AASB 141, the measurement methodology was changed for both Corporation B and C. It was decided that the combined corporation of B and C (hereafter known as Corporation BC) would value grapevines at cost under AASB 141. The change was justied based on the rebuttal presumption in paragraph 30, AASB 141. Corporation BC argued that the alternative estimates of fair value that it was utilizing at the time of transition to the standard were not reliable. In this situation, the asset is required to be valued at its cost less any accumulated depreciation. Paragraph 31 (AASB 141) states where an entity previously measured a biological asset at its fair value it must continue to measure the biological asset at its fair value until disposal. As Corporation B and C previously valued grapevines under AASB 1037 using measurement methods that provided the best indicator of fair value available to them, it would be assumed therefore that paragraph 31 would override the rebuttal presumption in paragraph 30. At the time of the interview, Corporation BC considered this to be so as it stated: The standard states that if you had an accounting policy (measurement method) taken out under the SGARA standard, then it would be very difcult to rebut the presumption. However, in a post-interview decision to utilize this presumption, Corporation BC argued that it had grounds to utilize it on the further detail provided in paragraph 31 (AASB 141) which considers that fair value can be measured reliably once a noncurrent asset is considered to be for sale (AASB 141, para. 31).
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For Corporation BC, its noncurrent grapevine assets are not held for saleable purposes unless as stated above a vineyard is sold. At that point only, it considers fair value can be measured reliably. At any point before this, fair value estimates for the grapevine assets are seen as being too unreliable by the corporation. This was clearly stated by Corporation BC: Valuation of vines is far too subjective. There is no observable market transaction for a vine, except when the vineyards are sold. Therefore, the valuation methodology was changed from a fair value estimate under the previous domestic standard to a cost methodology under the international standard. Whilst this change could be argued to be based on the requirements of the standard, Corporation BC has seemingly utilized these two paragraphs (30 and 31) in AASB 141 in such a way to ensure that it achieves the outcome that it desired. It clearly states in paragraph 31 that as the company was already valuing the grapevine assets under AASB 1037 using a fair value estimate this should have continued on transition to AASB 141. However, Corporation BC chose not to on transition to the international standard and chose the cost methodology.

Summary
These results from the interviews, whilst small, do suggest that the change to the international standard, AASB 141, has allowed rms some discretion to change measurement methods from the previous domestic accounting standard to suit their own self-interests. Corporation A moved from valuing its SGARA assets under AASB 1037 to valuing them as Property Plant and Equipment under AASB 116. Whilst, Corporation BC moved from valuing its SGARA assets separately using fair value methodology, to a cost valuation under AASB 141. Will consistency in measurement methods and therefore comparability be achieved through the implementation of the international standard it appears unlikely if rms choose to value their assets as they see t rather than following AASB 141 requirements.

The Achievement of Consistency and Comparability

This question sought to examine whether consistency and comparability had been achieved through the introduction of AASB 1037 and subsequent adoption of AASB 141. From an overall perspective, it was found that whilst consistency had been achieved at the rm level, comparability has not been.

Consistency
With the introduction of formal accounting regulations, Corporation A considered that consistency has been achieved at the rm level, by rms now applying measurement methods consistently year to year. Corporation BC also agreed that consistency has been achieved at the rm level. However, it considered that this has achieved very little as rms within its industry continue to utilize different methods, different valuation assumptions in calculating the value of the SGARAs and are reporting the assets differently. As stated by them: Who cares about consistency? (Corporation) B and (Corporation) C have been out there doing it differently (from each other) for the last ve years.

Comparability
Corporation A considered that comparability within its industry has not been achieved: I try and compare myself to the other players. It is difcult though as everyones doing it differently. Unless you know how people are actually reporting it, you are not comparing apples with apples.
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It backs up this statement with some previous research that it has conducted. It examined how other public forest enterprises have reported their annual valuation increments and/or decrements. It found that all forestry enterprises report their SGARAs slightly differently, and together with using different methods to report their forestry assets and not providing full disclosure of major assumptions, it has made comparability between enterprises very difcult. Corporation BC also considered that it was very difcult to compare across the industry as the values that rms were applying to their SGARAs, namely grapevines was making comparability difcult: If you had to come up with a value, . . . if you had four different valuers, you would come up with four different answers (values). Corporation A had also found that rms are utilizing different inputs for nancial ratio calculations. For example, Corporation A calculates return on assets excluding the forestry asset whilst other rms include it. The result of these differences is that benchmarking across the industry has become very difcult to the point where Corporation A does not benchmark anymore.

Summary
Both corporations agreed that consistency had been achieved at the rm level in rms applying the same measurement methods consistently year by year. However, comparability had not been achieved through the introduction of AASB 1037 and subsequent adoption of AASB 141.

Understandability of the Reporting of Living Assets in Financial Reports

Both of the corporations interviewed believed that the publics confusion in understanding reports prepared under this standard remains. Further, Corporation B did not believe that the public had an awareness how this information could be used in decision-making in any case.

Corporation A
Corporation A considered that the public had not come to understand the reporting of these assets yet, making the following comment: It (the reporting of these assets) is still a confusing issue for the public. In an attempt to reduce this perceived lack of understanding, Corporation A now separates the SGARA (biological growth) increment or decrement from the operating prot in the Income Statement. This is done for two reasons: to ensure transparency and so that we can talk about operating (revenue and) costs quite separately from the forestry valuation and the public can see the gure that we are talking about. Corporation A found that this was necessary due to the volatility in the valuation adjustment from year to year in the Income Statement. By not separating the two components: It makes it messy. Your prot can soar by 50 or 60 million dollars and the public thinks that the company (Corporation A) has made a huge prot. Then we have to explain, no, its actually just an increase in forestry valuation. Corporation A appears to be quite proactive in this area it is equipping its end users with the necessary information to gain an understanding of the reporting of these living assets and attempting to reduce any confusion in the public arena.
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Corporation BC has also found that there is still a lack of understanding in the public arena. However, even where the public do understand, it believes it doesnt actually achieve anything as the public cannot use this information in any way in the decision-making process. As a result of this, it typically presents the nancial report to the nancial markets with the SGARA numbers removed rst. Further, it has found that reporting analysts remove the SGARA numbers before any analysis is conducted. This is consistent with the ndings from Booth and Walker (2003) who found it difcult for analysts to undertake reasoned comparisons of the nancial performance of winemakers, due to inconsistent and incomplete assumption disclosures made by such businesses. As an example of the lack of understanding in the public arena, Corporation BC provided an example as follows: We once sat down with an analyst explaining the accounting treatment to him and he nally understood it (after we explained it). He said oh thats right and then just went away. That was the end of it. . . . It helped him understand it which was great but then once he understood it, he couldnt do anything with the information for any decisionmaking processes. However, without directly questioning this analyst, it is difcult to determine if the analyst did fully understand the accounting standard.

Disclosure of the Key Assumptions

Booth and Walker (2003) considered that it would be reasonable to suppose that for stakeholders to understand how SGARA revenues were calculated, they would require disclosure of the key assumptions underlying the valuation processes. In an examination of the two interviewees nancial statements, it was found that Corporation A disclosed all major assumptions in the notes to its nancial statements. However, neither Corporation B nor Corporation C prior to acquisition or post-acquisition as Corporation BC disclosed any major assumptions underlying the calculations of the SGARAs. In their respective notes to the nancial statements, the following comments were made: In determining the net market value, certain assumptions have been made including market prices, yields and quality of grapes and vineyard operating costs. This provides no information to help users and stakeholders gain an understanding as to how the SGARAs were calculated. In further questioning as to why these assumptions were omitted, Corporation BC considered that the average end user of nancial reports had no understanding of what these assumptions meant; therefore, there was little point in including them. As stated by Corporation BC: The calculation assumptions are of no use to anyone, the end users do not understand the nal gures and what they represent so how can they be expected to be interested in the assumptions. However, if Corporation BC does not provide the assumptions to the end users, how will the end users ever gain an understanding? Further, without providing any direct evidence, Corporation BC has assumed that it knows how end users think and that it knows what end users are interested in and therefore, it has made the decision not to provide the calculations for end users.

Discussion and Conclusion

This research study has focused on the transition of the domestic standard, AASB 1037 to the international standard, AASB 141 and whether sustainable reporting practices will be achieved for these agricultural assets.
Copyright 2009 John Wiley & Sons, Ltd and ERP Environment

Corp. Soc. Responsib. Environ. Mgmt. 16, 155166 (2009) DOI: 10.1002/csr

The Achievability of Sustainable Reporting Practices in Agriculture Corporation Actions in the shift from AASB 1037 to AASB 141

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In examining the two rms in this study, one rm changed accounting standards whilst the other rm changed measurement methods. With the opposition that has been caused by the introduction of an agricultural assets standard into the Australian nancial reporting arena, it appears perhaps that the movement to the international standard equivalent has given rms the avenue to report these assets as they see t but perhaps not rightly so. This has resulted in different rms using different measurement methods, which result in a lack of consistency and comparability in types of measurement methods being utilized.

Achievement of Consistency and Comparability

It was found consistency may be achieved at the rm level by rms applying the same measurement method to value their agricultural asset from year to year. Comparability between rms is unlikely to be achieved as the move to the international standard has allowed rms the exibility and discretion in the way they value these assets.

Perceptions of the Publics Understanding

From a users perspective, both corporations considered that there was still very limited understanding of the reporting of these assets in the nancial statements. Whilst there was no direct evidence provided as to this lack of understanding, these viewpoints are consistent with the study conducted by Booth and Walker (2003). With the requirement to account for these assets having been in place now since 2001, this is quite disappointing. Further, with the discretion in measurement methods that was found in this study, this could potentially make it even more difcult for users to understand the reporting of these assets. An educational programme aimed at improving this lack of understanding should be implemented by the AASB; otherwise this problem will continue to persist. It should be noted though, that this lack of understanding is likely to be caused by rms such as Corporation BC. Corporation BC does not attempt to educate the public by providing details in the notes of the major assumptions that underlie the calculation of SGARA valuations nor does it identify the SGARA prot separately in the income statement. How can the public gain an understanding of these assets and the calculations behind them, if rms do not provide essential information for them? The requirement under AASB 141, paragraph 47 for rms to disclose the methods and signicant assumptions applied in determining the fair value needs to be more rigorously enforced by the accounting profession.

Contribution to Sustainability Reporting

Whether or not this standard will contribute to enhancing sustainable reporting practices remains to be seen. Reporting on change, be it an addition to or regeneration of living assets albeit restricted to agricultural activities does offer the opportunity to identify the impact of commercial forest development and livestock impacts, for example, in contributing to fertilization and gases leached into the atmosphere. This would require actions beyond the present requirements of the standard but the groundwork is present.

Summary
Therefore, has consistency, comparability and understandability been achieved in the implementation of this agricultural standard? The short answer is no consistency may be to a limited extent, other than that no. This will not in any way help achieve sustainability in the reporting practices of these agricultural assets.

Limitations
There were two main limitations to this research. While there are advantages of doing so, the rst limitation was the reliance on a small number of interviews as the data collection method. Through using this technique, there
Copyright 2009 John Wiley & Sons, Ltd and ERP Environment

Corp. Soc. Responsib. Environ. Mgmt. 16, 155166 (2009) DOI: 10.1002/csr

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B. R. Williams and T. Wilmshurst

was the risk of bias, both through the interviewers and the interviewees attitudes and perceptions. To minimize this bias, standardized interview techniques and questions were utilized. The second limitation of this study is concerned with the recent introduction of the international standard from 1 January 2005. The results in this study need to be treated as tentative as the full effect of AASB 141 may not be known for some time yet. There are a number of directions future research could take. Whilst this paper focused on the wine industry and forestry industry, future research could examine other major industries affected by the SGARA (biological assets) standard to examine whether similar results are obtained. Further, with the acceptance of international standards by over 70 countries, investigations could be conducted to examine the measurement methods utilized in other countries and across different industries as AASB 141 becomes more widely applicable.

References
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Copyright 2009 John Wiley & Sons, Ltd and ERP Environment

Corp. Soc. Responsib. Environ. Mgmt. 16, 155166 (2009) DOI: 10.1002/csr