A preliminary investigation of the reporting of forest assets under International Financial Reporting Standards

Australia was the first country to develop a financial accounting standard on self-generating and regenerating assets (SGARAs). The standard AASB 1037 Self-generating and regenerating assets mandates reporting requirements for all non-human living assets, and so its scope includes forests. Reporting entities, including companies and state governments, that have material holdings of forests must comply with the standard. It has been operative for financial reporting periods ending on or after 30 June 2001 and so presents a unique opportunity to investigate the impact of reporting forests on a balance sheet. A particularly interesting feature of AASB 1037 is that it requires the net market value of forests to be estimated at the end of each reporting period. Changes in the net market values of forest assets are to be recognized as either revenues or expenses in the income statement. An investigation of the impact of AASB 1037 also provides valuable insights into the potential impact of IAS 41 Agriculture that must be complied with as part of international harmonization by Australia and all countries of the European Union from 1 January 2005. These insights are possible because the Australian standard and the international standard share many similar requirements regarding asset valuation and revenue recognition.