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# Property during the fiscal year will be posted to

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property during the fiscal year will be posted to profit and loss accounts with a separate growing stock receipt, and changes in bare value to the balance sheet. The closing of the books routine of the MARTTI book-keeping system collects opening accounts, book-keeping transactions including growing stock receipts as well as the value of the growing stock and its calculated changes supplied by the MELA system. These calculations also split the impact of stumpage price changes and that of change in the growing stock. Both changes are shown in the profit and loss statement. The stumpage prices are those of the end of the year by forest centre and roundwood assortment. The bare land value is also calculated, based on the same stumpage prices. The change in the value of growing stock is posted to the profit and loss account, and the impact of this change caused by the price change is posted separately. Finally, the change caused by the growing stock without price impacts is posted, supplying the change in the allowable cut and the rest of the growing stock separately. The change in bare value, posted in the revaluation surplus of the balance sheet, has no affect on the profit and loss. 2.4 Accounting solutions The discount rate If market-determined prices or values are not be available for a biological asset in its present condition, ‘an enterprise uses the present value of expected cash flows from the asset discounted at a current market-determined pre-tax rate in determining fair value (IAS 41.20). 5 This rate definition remains quite general, however. Especially in forestry, with as much as an 80–100 year production period, the interest rate dominates the whole fair value estimation. In theory, the discount rate used in present value calculations r pv can be defined as: r pv = r f + σ , where r f is the risk-free rate as represented by the return on a government security of a maturity similar to the item to be valued and σ stands for the risk premium (Eckel et al. 2003). The risk-free rate responds to market-wide events but not to firm-specific or item-specific risks. The use of the risk-free rate to discount ‘risky’ cash flows is theoretically incorrect (Bodenhorn 1984). The risk premium may reflect default as well as variability-in-return risks (Hirschleifer 1970). Risk may be responsive to (ii) market conditions (real and inflationary), (ii) maturity, (iii) firm-specific risk, and (iv) item-specific risk (Eckel et al. 2003). In all, (a) the discounted present value is a good 5 This pre-tax rate has been impugned. Kvaal (2007) advocates an amendment of the standard IAS 36 Impairment of Assets such that value in use is measured by company-specific after-tax cash flows, and such that deferred taxes are in - cluded in the impairment review. The policy implication of this is that the standard’s requirement ought to be changed to a post-tax valuation.

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Working Papers of the Finnish Forest Research Institute 93 17 surrogate for the market value. However, (b) an equivalent evaluation can be based on whether the discount rate used is equal to the rate that would have been used in the market (Eckel et al.
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• Spring '17
• Jane Smith
• Balance Sheet, The Land, ........., International Financial Reporting Standards, Finnish Forest Research Institute

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