Accounting Treatment of Biological Assets and Financial Reporting in Agricultural Firms in Nigeria

This study examines how agricultural firms in Nigeria account for biological assets and the implications of this treatment for financial reporting quality. The adoption of International Financial Reporting Standard 41, which requires the measurement of biological assets at fair value less costs to sell, presents significant challenges for Nigerian agribusiness operators who often lack reliable market price data for crops, livestock, and plantations. This issue is particularly acute in the South West and North Central agricultural belts where cocoa, palm oil, and soybean farming are dominant. This study uses a survey design and document analysis approach, collecting data from 70 accountants and finance managers in 15 registered agricultural firms across Oyo, Osun, and Kwara States. The study evaluates the accounting methods adopted, the availability of valuation expertise, and the impact of fair value measurement on reported profit and asset values. Descriptive analysis and regression are applied. Results indicate that most sampled firms use cost-based approximations for biological asset valuation due to limited access to certified valuers and unreliable commodity price data. This leads to undervaluation of assets and distortion of reported profitability. The study concludes that full IFRS 41 compliance remains out of reach for many Nigerian agricultural firms without improved valuation infrastructure. It recommends that the Financial Reporting Council of Nigeria develop sector-specific guidance on biological asset measurement that accounts for Nigeria's data environment.

Keywords: biological assets, IFRS 41, agricultural firms, fair value, financial reporting.