The updated stand information requires three mela

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The updated stand information requires three MELA runs for: (i) the fair values of the growing stock by forest stand, (ii) the allowable cut values by stand and (iii) the bare land values also by stand. The results, together with the book-keeping transactions, provide the balance sheet and the profit and the loss of the fiscal year as averages of 28 farms and by hectare (Table 2). The proposed income statement is as informative as possible, supplying the operating margin in the spirit of the old expenditure-revenue theory. The profit of the year is in line with IAS 41, but realised profit after subtracting the price change impact discloses additional information. All EconomyDoctor results contain an economy value added (EVA) type of result after subtracting the interest claim of capital. Operating margin is clearly less than expected in 2005, perhaps because of timber not being sold actively. The change in allowable cut in 2005 is really negative, also caused by the negative stumpage pricetrend. The profits could be seen as relatively modest. Table 2. The adjusted income statements of 28 forest holdings (panel data) in the 2004 and 2005 fiscal years. Year 2004 2005 Number of farms 28 28 28 Average forest area. ha/farm 83.82 84.44 Per cent Eur/farm Eur/ha Eur/farm Eur/ha Net Sales (Turnover) 10,534 126 14,961 177 100 Subsidies 435 5 314 4 2 Forest-owner’s use 393 5 528 6 4 Variation in stocks of finished goods 4 0 145 2 1 Materials and supplies -624 -7 -6,886 -82 -46 Outsourced services -1,136 -14 -436 -5 -3 Personnel expenses -56 -1 0 0 0 Wage claim of entrepreneur’s work -1,569 -19 -2,132 -25 Other operating expenses -722 -9 -769 -9 -5 Operating margin 7,258 87 5,725 68 38 Depreciation -332 -4 -425 -5 -2 Change in the fair value of growing stock 15,082 180 5,272 62 35 Non-merchantable growing stock 14,789 176 7,367 87 49 Allowable cut 293 3 -2 095 -25 -14 Operating profit (loss) 22,008 263 10,573 125 71 Financial income 165 2 181 2 1 Financial expenses -87 -1 -385 -5 -3 Profit (loss) for the financial year 22,086 263 10,369 123 69 The impact of the stumpage price change on the value of the growing stock -8,752 -104 4,545 54 30 Realised profit (loss) 13,334 159 14,913 177 100 Interest claim of equity (5%) -16,962 -202 -17,212 -204 -115 Entrepreneur’s profit (loss) -3,628 -43 -2,298 -27 -15
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Working Papers of the Finnish Forest Research Institute 93 28 The value of bare land is surprisingly low. The allowable cut is the key figure, and turns out to represent a real buffer for agriculture, although the profitability was less than expected. The return on investment (ROI) figures show the impact of the price change component (Figure 6). The results have been supplied to the farms, which deliver updates for 2006 and 2007. A key notion is to deliver as much information as possible. By placing the change in the value of the growing stock after the operating margin, the owner receives both results by way of the traditional transaction based accounting and the new fair value based one. Moreover, the growing stock has been split between mature (allowable cut) and immature (young and middle-aged stands) biological assets as encouraged by IAS 41.43. Even the impact of price change and physical change has been disclosed, as suggested in IAS41.51.
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  • Spring '17
  • Jane Smith
  • Balance Sheet, The Land, ........., International Financial Reporting Standards, Finnish Forest Research Institute

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