Optimal Cost Accounting Methodologies for Tropical Livestock Enterprises
DOI:
https://doi.org/10.24054/cyta.v10i2.4253Keywords:
financial assessment, production systems, valuation methods, environmental accountability, economic performanceAbstract
This article analyzes the limitations of cash-based accounting and the fair value measurement required by IAS 41 in tropical livestock enterprises and proposes an alternative managerial accounting framework based on the accrual principle. The methodology relies on an analytical and comparative review of international financial reporting standards, a systematization of recent literature on biological asset valuation, and a conceptual analysis of the tropical bovine production cycle, integrating criteria for cost classification, allocation, and capitalization. The results show that fair value measurement can generate high accounting volatility when reliable active markets are absent, while cash accounting distorts profitability by misaligning costs and revenues in prolonged biological cycles. Evidence further indicates that stage-based costing, cost capitalization, and the inclusion of opportunity costs produce more stable and management-relevant metrics. The discussion argues that structural characteristics of tropical systems—long production cycles, productive heterogeneity, market informality, and environmental risks—undermine the strict methodological applicability of IAS 41; therefore, incorporating total economic cost and the Risk-Adjusted Cost of Production (RACP) improves the assessment of financial and environmental sustainability. In conclusion, the study recommends adopting accrual-based systems, strengthening cost traceability, and using alternative valuation methods when fair value measurement is not reliable.
Downloads
References
Agosta, M., Schimmenti, E., Di Franco, C. P., & Asciuto, A. (2025). Agricultural land markets: A systematic literature review on the factors affecting land prices. Land, 14(5), 978. https://doi.org/10.3390/land14050978
Argilés, J. M., Garcia-Blandon, J., & Monllau, T. (2011). Fair value versus historical cost-based valuation for biological assets: Predictability of financial information. Revista de Contabilidad – Spanish Accounting Review, 14(2), 87-113. https://doi.org/10.1016/S1138-4891(11)70029-2
Aryanto, Y. H. (2011). Theoretical failure of IAS 41. SSRN. https://doi.org/10.2139/ssrn.1808413
Barry, P. J., & Ellinger, P. N. (2012). Financial management in agriculture (7th ed.). Pearson.
Campos-Llerena, L. P., Arias Pérez, M. G., Vayas López, Á. H., & Barreno Córdova, C. A. (2025a). Valuation of biological assets and reasonableness of financial information: A systematic review of empirical evidence in the agricultural sector. Sapienza: International Journal of Interdisciplinary Studies, 6(3), 1–15. https://doi.org/10.51798/sijis.v6i3.1105
Campos-Llerena, P., Arias-Pérez, M., Toscano-Morales, C., & Barreno-Córdova, C. (2025b). Biological Assets in Agricultural Accounting: A Systematic Review of the Application of IAS 41. Journal of Risk and Financial Management, 18(7), 380. https://doi.org/10.3390/jrfm18070380
Damodaran, A. (2012) Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. 3rd Edition, Wiley, Hoboken.
Dudycz, T., & Praznikow, J. (2020). Does the mark-to-model fair value measure make assets impairment noisy? A literature review. Sustainability, 12(4), 1504. https://doi.org/10.3390/su12041504
Elad, C. (2004). Fair value accounting in the agricultural sector: Some implications for international accounting harmonization. European Accounting Review, 13(4), 621–641. https://doi.org/10.1080/0963818042000216839
Elad, C. (2011). Implementing fair value accounting in the agricultural sector. Institute of Chartered Accountants of Scotland. https://archive.org/details/implementingfair0000elad.
FAO. 2025. Ganadería Sostenible en América Latina y el Caribe. Santiago. https://openknowledge.fao.org/server/api/core/bitstreams/b00b2a0a-6f82-4420-abe0-0ee48b5f3d27/content
Figueroa, D., Galicia, L., & Suárez Lastra, M. (2022). Latin American cattle ranching sustainability debate: An approach to social-ecological systems and spatial-temporal scales. Sustainability, 14(14), 8924. https://doi.org/10.3399/su14148924
Flynn, S., Moretti, D., & Cavanagh, J. (2016). Implementing accrual accounting in the public sector (IMF Technical Notes and Manuals, Vol. 2016, Issue 006). International Monetary Fund. https://doi.org/10.5089/9781513589466.005
Food and Agriculture Organization of the United Nations. (2008). Economics for market-oriented farming (Farm management extension guide No. 1). FAO. https://www.fao.org/3/i0411e/i0411e.pdf
Food and Agriculture Organization of the United Nations. (2016). Handbook on agricultural cost of production statistics: Guidelines for data collection, compilation and dissemination. FAO. https://openknowledge.fao.org/server/api/core/bitstreams/b8bacbd8-83c7-4b4f-adb4-7024d7d6b4f8/content
Gonçalves, R., & Teixeira Lopes, P. (2018). Accounting for biological assets. Routledge. http://136.175.10.10:8082/ebook/pdf/Accounting_for_Biological_Assets.pdf
Hefley, J., Millholin, R., & Brown, B. (2025, September). Livestock risk protection (LRP) insurance. University of Missouri Extension. https://extension.missouri.edu/publications/g459
Herrero, M., Thornton, P. K., Power, B., Bogard, J. R., Remans, R., Fritz, S., Gerber, J. S., Nelson, G., See, L., Waha, K., Watson, R. A., West, P. C., Samberg, L. H., van de Steeg, J., Stephenson, E., van Wijk, M., & Havlík, P. (2017). Farming and the geography of nutrient production for human use: A transdisciplinary analysis. The Lancet Planetary Health, 1(1), e33–e42. https://doi.org/10.1016/S2542-5196(17)30007-4
Horngren, C. T., Datar, S. M., & Rajan, M. V. (2012). Cost accounting: A managerial emphasis (14th ed.). Pearson Prentice Hall.
International Accounting Standards Board. IASB (2023). IAS 41: Agriculture. IFRS Foundation. https://www.ifrs.org/issued-standards/list-of-standards/ias-41-agriculture/
Kaplan, R. S., & Anderson, S. R. (2007). Time-driven activity-based costing: A simpler and more powerful path to higher profits. Harvard Business School Press. https://www.hbs.edu/ris/Publication%20Files/04-045_d62528d4-7931-4ea1-a205-d9683c639d6e.pdf
Kay, R. D., Edwards, W. M., & Duffy, P. A. (2020). Farm management (9th ed.). McGraw-Hill Education. https://www.mheducation.com/unitas/highered/sample-chapters/9781260002195.pdf
Marrufo García, R. D., & Cano Morales, A. M. (2021). Accounting treatment of biological assets and agricultural products. Visión de Futuro, 25(2), 63–80. https://doi.org/10.36995/j.visiondefuturo.2021.25.02R.002.en
Mendoza, D. G. R. (2007). Contabilidad pecuaria y costos ganaderos. Librería y Galería Sin Límite. https://agroinformatica.com.ve/wp-content/uploads/2019/08/contabilidad-pecuaria-por-Gerardo-Mendoza.pdf
Moncaleano-Vega, J., Amaya, A., Martínez, C., Burgos-Paz, W., & Cerón-Muñoz, M. (2024). Economic utility of Colombian Romosinuano cattle. Tropical Animal Health and Production, 56, Article 217. https://doi.org/10.1007/s11250-024-04066-z
Perry, B., & Grace, D. (2009). The impacts of livestock diseases and their control on growth and development processes that are pro-poor. Philosophical Transactions of the Royal Society B: Biological Sciences, 364(1530), 2643–2655. https://doi.org/10.1098/rstb.2009.0097
Petrescu, IE., Ignat, R., Constantin, M., Istudor, M. (2022). Risk Management of Agri-Food Value Chains—Exploring Research Trends from the Web of Science. In: Dima, A.M., Kelemen, M. (eds) Digitalization and Big Data for Resilience and Economic Intelligence. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-93286-2_4
Poppe, K., Vrolijk, H., & Bószlopper, I. (2023). Integration of farm financial accounting and farm management information systems for better sustainability reporting. Electronics, 12(6), Article 1485. https://doi.org/10.3390/electronics12061485
Rexroad, C., Valle, J., Matukumalli, L. K., Reecy, J., Bickhart, D., Blackburn, H., Bogges, M., Cheng, H., Clutter, A., Cockett, N., Ernst, C., Fulton, J. E., Liu, J., Lunney, J., Neibergs, H., Purcell, C., Smith, T. P. L., Sonstegard, T., Taylor, J., … Van Tassell, C. P. (2019). Genome to phenome: Improving animal health, production, and well-being—A new USDA blueprint for animal genome research 2018–2027. Frontiers in Genetics, 10, Article 327. https://doi.org/10.3389/fgene.2019.00327
Strassburg, B. B. N., Latawiec, A. E., Barioni, L. G., Assaad, E. D., Ojima, D. S., Valentim, J. F., et al. (2014). When enough should be enough: Improving the use of current agricultural lands could meet production demands and spare natural habitats in Brazil. Global Environmental Change, 28, 84–97. https://doi.org/10.1016/j.gloenvcha.2014.06.001
Thornton, P. K., Boone, R. B., & Ramirez-Villegas, J. (2015). Climate change impacts on livestock (CCAFS Working Paper No. 120). CGIAR Research Program on Climate Change, Agriculture and Food Security (CCAFS). https://hdl.handle.net/10568/66474
Thornton, P. K., Nelson, G., Mayberry, D., & Herrero, M. (2021). Increases in extreme heat stress in domesticated livestock species during the twenty-first century. Global Change Biology, 27(22), 5762–5772. https://doi.org/10.1111/gcb.15825
Tilman, A. R., Vasconcelos, V. V., Akçay, E., & Plotkin, J. B. (2023). The evolution of forecasting for decision-making in dynamic environments. Collective Intelligence, 2(4), 1–14. https://doi.org/10.1177/26339137231221726
Williams, G. W., & Anderson, D. P. (2019). Growth of the Latin American livestock industry: Situation and challenges. Choices, 34(4), 1–12. https://www.jstor.org/stable/27098531
Yang, G., Ling, L., Zhen, L., Zhang, Y., Xu, X., Zhang, H., & Xu, Y. (2022). Research trends in crop–livestock systems: A bibliometric review. International Journal of Environmental Research and Public Health, 19(14), 8563. https://doi.org/10.3390/ijerph19148563
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Gerardo Mendoza Delgado
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
