ANALYSIS OF BIOLOGICAL ASSETS VALUATION WITH FAIR VALUE ACCOUNTING AND HISTORICAL COST ACCOUNTING METHOD IN PLANTATION SUBSECTOR OF INDONESIAN AGRICULTURAL INDUSTRY IN THE PERIOD OF 2007-2012
Karina Putri Ramadhani1 and Indra Pratama2 1 Thesis Writer, Swiss German University 2 Thesis Advisor, Swiss German University

Abstract The analysis of biological assets valuation with fair value accounting and historical cost accounting method in plantation subsector of Indonesian agricultural industry, in the period of 2007-2012, tries to evaluate the relevance of historical cost towards the fair value of biological assets. It also tries to look for empirical evidence on the differences in calculations on biological assets between FVA and HCA toward company’s EBIT, net income, and potential tax liabilities. The research tests 5 companies within the plantation subsector in agricultural industry listed in Bursa Efek Indonesia (BEI). This study shows that there is a strong correlation between all variables tested. Among all statistical tests conducted, all hypotheses are rejected. This study concludes that the historical value of biological assets does not represent its real fair market value, or irrelevant. Also, the change in biological assets valuation from historical cost to fair value accounting would significantly affect the company’s EBIT, tax expense, and net income. Keywords: Fair Value, Historical Cost, Agricultural Industry, Plantation, Fair Market, EBIT, Tax Expenses, Net Income.

1. Introduction The dynamic market condition, particularly the volatility of the country’s economic conditions will likely affect the company’s performance over time (Besanko, Dranove, Shanley, & Schaefer, 2007). Depending the magnitude of the variability in the marketplaces, in shortrun, not all companies are affected (Gompers, Ishii, & Metrick, 2003; Bearley, Myers, & Marcus, 2009;