RELIABILITY IN FAIR VALUE OF ASSETS WITHOUT AN ACTIVE MARKET

Abstract

The application of fair value for measuring forest assets is a complex process that involves different actors: accountants, valuators and auditors. The objective of this paper is to analyze the construction process of fair value in biological forest assets discussing subjectivity and conflict issues among the actors involved in this process by the perspective of trust and risk presented by Giddens’ work (1990). The phenomenographic research has been used to capture the conception of this evaluation model among the involved actors. Across the interviews, three categories of outcomes were identified: “model”, that means the process of how information is generated and treated until it turns to monetary values; impacts on earnings; and finally disclosure and validation. The “model” constitutes the core element in reliability´s debate; therefore it should involve and drive all the actors to a consensus on final value of the biological assets. Nevertheless, to achieve this model validation, critical factors should be considered, such as, the selection of future prices of an asset - not always from an active market; the impacts on earnings; that weakens the validation process. Another negative aspect regarding the model validation is the business model used to manage that asset – that can be either a raw material, or a product, raising conflicts in the interpretation of this information, undermining the informational capacity of income. It be concluded that reliability in fair value context is more linked to the consensus of the involved actors then to the verifiability of the documents, reinforcing that the accounting is a social construction process.