Details

Case

Jassar Farms Private Limited: The Predicament of Livestock Valuation

Research Associate Mr. Muhammad Imran Chaudhry, Dr. Muhammad Junaid Ashraf, Dr. Zeeshan Ahmed

INDUSTRY : Livestock, Farming

AREA : Finance

ORGANIZATION : Jassar Farms Private Limited

LENGTH : 18

LUMS No : 02-626-2011-1

PUBLICATION YEAR : 2011

KEYWORDS:

Jassar Farms,Private Limited,Predicament of Livestock,Valuation,International Accounting Standards,Agriculture,Benchmark,Pakistan,Product Development

DESCRIPTION:

The biological assets at Jassar Farms represent approximately 40% of the total assets. The case describes the stand-off between the management and the auditors on the valuation of the cross-bred cattle, especially on issues pertaining to the capitalization of rearing and reproduction costs. Shahzad Iqbal, CEO Jassar Farms, understands the importance of an unqualified audit report; however he is convinced that the auditor¿s valuation does not capture the economic reality of the biological assets at Jassar Farms.

LEARNING OBJECTIVES:

1) Understand the basis for capitalization of particular costs and their validity in the light of the conditions for capitalization outlined in the International Accounting Standards. 2) Assess the relevance of the valuation methodologies presented in IAS 41 in their ability to reflect the economic reality of biological assets in a particular setting. 3) Determine the value of specialized assets useing the ciscounted future cash flow approach. 4) Compare and contrast the carrying values of biological assets under the Cost/Fair Value model approach. 5) Determine the effect of the use of the Cost/Fair Value model on the financial statements.

SUBJECTS COVERED:

Finance