Analysis of subjectivity in measuring assets assessed by level 3 of the fair value hierarchy

摘要

The study aims to analyze the accounting treatment applied in measuring biological assets that reach level 3 of the fair value hierarchy by publicly traded Brazilian companies. The sample consisted of 12 companies, and data were collected in the Explanatory Notes from 2015 to 2019. Information on asset measurement methods, subjectivity, risks, and measurement uncertainties was investigated. The results show that companies classify these assets as having a more uncertain and subjective measurement. The most used measurement method is the discounted cash flow, and six companies apply the discount rate based on the weighted average cost of capital. In general, the measurement of assets is not well evidenced, making it difficult for the user to understand. The study contributes to discussions about the increased subjectivity arising from more complex accounting practices, which involve greater judgment and application of internal estimates in measuring biological assets. The increase in subjectivity requires better clarification so that the information is understood. Companies with biological assets measured at level 3 of the fair value hierarchy need to assess the trade-off between the subjectivity of the estimates applied and the increase in information asymmetry to external users.