Case Solution & Analysis for Olam: Accounting for Biological Assets by Yew Kee Ho, Teo Chee Khiang, Sitoh Kheng Hoe.
Complete Case details are given below :
Case Name : Olam: Accounting for Biological Assets
Authors : Yew Kee Ho, Teo Chee Khiang, Sitoh Kheng Hoe
Source : Ivey Publishing
Case ID : 9B15A042 / W15369
Discipline : Accounting
Case Length : 14 pages
Plagiarism : NO (100% Original work)
Description for case is given below :
In 2012, an equity research firm based in California accused Singapore-based Olam International Limited (Olam) of engaging in potentially misleading and dangerous accounting practices. The firm – Muddy Waters Research – further stated that Olam was on the verge of bankruptcy. The primary complaint made against Olam by Muddy Waters was that Olam allegedly made aggressive use of “non-cash accounting gains,” particularly when reporting on Olam’s biological assets. Olam’s share price tumbled after the accusations were made public. Olam defended itself by asserting that it had applied Singapore Financial Reporting Standard (FRS) 41 – Agriculture appropriately and that the fair value gains of the biological assets were justifiably derived. FRS 41, equivalent to International Financial Accounting Standards 41 – Agriculture, required Singapore-listed companies to use fair value in the measurement of biological assets. This case examines the complex challenges that valuators face when presented with different valuation models, the application of financial reporting standards and the fine balance between reliability and relevance in the accounting of assets in the real world.
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