The unrealized gains and losses from changes in the

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The unrealized gains and losses from changes in the fair value of forest assets imply that dividends may well be paid in advance of any cash flow obtainable from the harvest (Australian Accounting Research Foundation 1997, p. 65). Moreover, the subjectivity in estimates of fair value provides scope for manipulation (Herbohn 2006). Fair values can be unreliable because of intrinsic error in the measurement or the input to the measure. Fair value measurements may be derived from models that contain simplified assumptions that introduce measurement error and require inputs (such as income of cash flow forecasts) that are themselves subject to measurement error. In addition, intentional bias in inputs or judgements and even lack of expertise may occur (Shipper 2005). The fair valuation of different assets and liabilities in a balance sheet should, according to Schuetze (2001), be based on how they can be converted into cash. 1.5 The objective of the study The purpose of this study is to apply all relevant IAS/IFRS statutes and relevant theoretical contributions to constructing and developing accounting application of the profitability book- keeping of the MTT Economic Research for forest holdings. The focus of this study is to find out whether the international accounting standards (IASs) are applicable to forestry and to test the structure of the closing of the books reports and profitability ratios. IAS 41 (Agriculture) is
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Working Papers of the Finnish Forest Research Institute 93 12 based on the application of fair value in the valuation of the growing stock. Where the market- determined price may not be available, an enterprise uses the net present value of future cash flows from the asset discounted at a current market-determined pre-tax rate (IAS41.20). The kernel of the development is the evaluation of IAS ‘fair value’ of the growing stock, classified as mature and immature biological assets, and the annual changes in their values for accounting purposes. The changes due to stumpage price and physical change in the growing stock will also be disclosed separately. Moreover, fair value of bare land is estimated annually for each stand as well. The closing of books according to IAS/IFRS has been calculated here for 28 farms and the years 2004 and 2005. There are various ex-ante and ex-post methods for forest valuations. Ex-ante methods are based in general on a forest management plan (FMP) and its field measurements, called the forest inventory data, used for calculating the expected values of the forest property. Updates after the inventory are recognized and included. This study and development work aim at solution systems as well as data and service networks, which produce the results for the book-keeping farms. The development of the service required improvements in both the profitability book-keeping system MARTTI (2008) and the parameter set definition of the forest management planning system MELA (Redsven et al.
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