Heritage and Biological Assets

According to the Accounting Standards Board (UK, 2006), a heritage asset was defined as ‘an asset with historic, artistic, scientific, technological, geophysical or environmental qualities that is held and maintained principally for its contribution to knowledge and culture and this purpose is central to the objectives of the entity holding it’. It also has been defined by Canadian Institute of Chartered Accountants (1989) as ‘fixed assets that a government intends to preserve indefinitely because of their unique historical, cultural r environmental attributes’. In accordant with the auditor-general of NSW, a common characteristic of heritage assets is that they cannot be replaced. As UK ASB listed some heritage assets and with the definitions above, examples of heritage assets are national parks, national monuments, museum and library collections, and historical buildings and sailing vessels. Therefore, it is hard to restrict access to heritage assets and the assets have limited ways of use. Heritage assets are unique. Main difference is that, unlike assets which are ommonly held by private-sector entities, these assets will never generate significant cashflows in the future. On the contrary, they are likely to decrease future cashflows in order to ensure they are maintained at their current value to society. Also, their value is likely to increase over time and as they age, in contrast with most private sector assets (i. e. depreciation & amortisation). Moreover, by definition, heritage assets do not exist to produce wealth to individuals who ‘own’ them while typical assets ‘owned’ by entities usually benefit he holders of the assets. The difficulties related to determining the appropriate measurement and disclosure of heritage assets would raise another difference with typical assets that are held by private-sector entities. Generally a biological asset is defined as ‘a living animal or plant’. The unique characteristics of biological assets are as follow: Y Biological assets have a nature of growing and/or procreating capacities that would directly effect on the value of the asset. Y As the assets are greatly influenced by environment such as sun, air and wind, the value and olume of the assets would be increased. Y Most costs of the assets would be incurred when the time the assets are acquired. Y Maturity of the assets (life or growing cycle) normally takes longer period of time than other assets. Y Actual expenses for the assets would not respond exactly to the amount. Outcome would vary depending on the natural circumstances, flooding or droughts for instance. Roberts, Staunton and Hagen (1995) propose current market value of livestock should be applied to evaluate biological assets for financial reporting purpose. Moreover, hey insist that only those changes in value because of volume changes need to be treated as income. Their recommendations are based on the statement of Roberts (1988) quote: ‘Within the spirit of the principles of current-cost accounting it is reasonable, true and fair to have the livestock inventory shown in balance sheet at net realisable value provided that the basis is stated and that it is verifiable. Such a value is also meaningful and acceptable for expectations of ratios such as returns on capital employed. It is however, in the area of accounting for rofit that dissensions occur. This is particularly so where breeding, and thus the problems associated with animated plant and the retention of productive capacity, arises’. AASB 141, however, does not include or support RSH’s suggestions stating that ‘a gain or loss arising on initial recognition of a biological asset at fair value less estimated point-of-sale costs and from a change in fair value less estimated point-of-sale costs of a biological asset shall be included in profit or loss for the period in which it arises’.

One of characteristics of an asset is that it must possess a cost or other value that can be reliably measured to be recognised for the purposes of disclosure in a general-purpose financial statement. Heritage assets are, however, by their nature and uniqueness, difficult to measure their current values in accounting numbers. As there are few markets available for heritage assets, values for similar assets are typically also not available. Those charged with valuing an asset will therefore lack experience in valuing such assets at either market price or eplacement cost. It is a difficult proposition to come up with a reliable valuation. Conceivably, different valuations made by ‘expert’ valuers could provide widely disparate results. Such an outcome would be grounds against asset recognition. Where market prices are not available, alternative valuation techniques can be employed, although these could be cause for concern from a reliability point of view, raising questions in turn about how an external auditor might assess the reasonableness of asset valuations appearing in a statement of financial position.

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