Assessment of Accounting Methods Practiced by Malaysian Public Listed Companies in Agriculture Sector

Abstract

This paper examines the existing accounting methods practiced by Malaysian public listed companies in agricultural sector in relation to palm oil trees, which falls under biological assets. The results based on the interview of six palm oil plantation companies indicate that the cost method is the most practiced method as compared to the fair value method. This is because the complexity of fair value raises problems to the company in measuring palm oil trees, and also gives impact to profit and loss account. Furthermore, fair value raises controversial issues particularly relating to palm oil trees where the income-producing biological assets have long economic lives that stretch beyond ordinary accounting periods. The fair value method was introduced by IAS 41 (Agriculture) as measurement method for biological assets. Since palm oil trees gives huge contribution to Malaysia’s economy, it is necessary to study this new proposed standard of agriculture before it is implemented in order to determine whether it would bring more advantages or disadvantages to Malaysian plantation companies as well as the Malaysia’s economy as a whole.