Is possible to estimate fair value of biological assets?
On Friday 10 September 2021 Bjarne Møller will hold a trial lecture on a prescribed topic and defend his thesis for the PhD degree at NHH.
Prescribed topic for the trial lecture:
«Fair value accounting for financial vs operational assets»
10:15 in Zoom video conference / Aud. N, NHH
Title of the thesis:
«Valuation of Inventory of Live Biological Assets: Measurement, Value Relevance and Usefulness to Equity Investors»
Bjarne Møller has written a PhD thesis that studies whether it is possible to estimate fair value of biological assets and whether financial analysts find such information useful within a context of the Norwegian salmon industry.
Salmon farming requires a licence to operate. Although the purpose is to control externalities, the licence has become a barrier to entry and an important intangible asset in a highly profitable industry. Inventory of live biological assets is the only asset that interacts with other assets within a Cash Generating Unit to create a common cash flow that is measured at fair value.
The thesis explores whether the fair value of inventory may be unambiguously determined when the fair value of the license is unobservable, and it also discuss the interpretational confoundment that arises when different measurement bases are applied for the inventory and other assets.
The thesis also studies whether financial statements based on fair value measurement better predicts stock prices, stock market return and cash flows and whether sell side equity analysts apply information about fair value in their valuations.
Key findings are that we run into allocation problems that in principle is insolvable, that it is possible to find parsimonious valuation models that fulfils a set of valuation axioms, but that no “gold standard” for valuation exists. Equity analysts prefer accounting information that could be used directly as input to their valuation models and their decision to ignore the fair value information seems rational. The information content of the fair value adjustments is little above the salmon price, and the fair value adjustment in the profit and loss statement is difficult to interpret. It is difficult to form an expectation about the adjustment and even more difficult to compare actuals to expectations.
Members of the evaluation committee:
Professor Kjell Henry Knivsflå (leader of the committee), Department of Accounting, Auditing and Law, NHH
Professor Erlend Kvaal, BI Norwegian Business School)
Førsteamanuensis Benita Maria Gullkvist, Hanken School of Economics
Professor Frøystein Gjesdahl, Department of Accounting, Auditing and Law, NHH
The trial lecture and thesis defence will be open to the public.