Should Tasmania’s Leatherwood Trees be recognized as Assets?

This article discusses whether Tasmania's leatherwood trees should be recognized as assets. It examines the relevant accounting policies and standards, and concludes that while the trees can be considered as agricultural assets, they do not meet the criteria for community assets.

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Corporate Accounting
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Author’s Note

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Formal Letter
To,
Terry Tudor
19/50 Railway Terrace
St. Lucas NSW 4049
Date: 15th March, 2019
Subject: Should Tasmania’s Leatherwood Trees be recognized as Assets?
Sir,
I have recently come to know about the incident of the destruction of 190,000 hectors of
Tasmanian wilderness that included large amount of leatherwood trees. This incident majorly
affected the Tasmanian honey industry due to its dependency on the leatherwood trees for the
production of honey. I have also come to know the fact that the Federal Government has
announced the availability of Commonwealth disaster funds for covering the cost of damage
due to bushfire so that the leatherwood trees can be protected. I have gained knowledge about
the concern of Tasmanian Premier Will Hodgman that the Commonwealth disaster fund
cannot be used for this very purpose as this fund is only used for protecting public assets or
community assets. This statement indirectly points towards the fact that the leatherwood trees
are not public or community assets.
I consider this as a crucial issue and I have done an excessive research on this issues that
includes the interpretation of the relevant Conceptual Framework, Accounting Policies and
Conventions. The results of my research is shown below.

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The presence of certain regulations and standards can be seen in Australia for the accounting
treatment of community assets of the country. The name of this accounting policy is ACT
Accounting Policy and the standards of this policy is applied to heritage and community
assets held by the departments and territory authorities (treasury.act.gov.au 2019). At the time
of the accounting of community assets, the respective agencies are needed to comply with the
relevant Australian Equivalent to International Financial Reporting Standards (AIFRS). At
the time of reading this policy, certain standards of Australian Accounting Standard Board
(AASB) need to be considered; they are AASB 116 Property, Plant and Equipment, AASB
136 Impairment of Assets and AASB 1045 Land Under Roads: Amendments to AAS 27A,
AAS 29A and AAS 31A (treasury.act.gov.au 2019).
ACT Accounting Policies have provided the definition of Community Assets that need to be
considered at the time of their accounting. According to ACT Accounting Policies, Section
2.1.2 Community Assets, community assets are those assets that are provided fundamentally
for the use or service of general community (treasury.act.gov.au 2019). Community assets
include land under roads, national park, urban parks and sports ground, natural reserves and
rural recreational reserves and picnic/campaign areas. From this part of the analysis, it can be
clearly seen that the list of community assets provided by ACT Accounting Policies does not
include any kind of trees. This is a crucial aspect to be considered in this case (Wild 2013).
After that, at the time of the recognition of community assets, it is needed to consider AASB
116 paragraph 7. As per AASB 116, paragraph 7, an asset needs to be recognized when it is
probable that there will be inflow of future benefit associated with the asset towards the entity
and the cost of this asset can be measured on reliable basis (aasb.gov.au 2019). Along with
these rules, the additional requirement of ACT Accounting Policies is that the agencies can
only recognize the community assets those are above the capitalized threshold of these
agencies between $2,000 and $5,000. It can be said on the basis of the above discussion that

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the companies in Tasmania use the leatherwood trees for the purpose of extracting honey and
it implies that there is not any state agency in Tasmania that uses these trees. In addition,
these leatherwood trees are used for the commercial purpose. At the same time, another
crucial fact is that there is not any minimum threshold used for the purpose of these
leatherwood trees (Ellwood and Greenwood 2016). These are certain other crucial points that
need to be considered while considering the leatherwood trees as assets.
It can be seen in ACT Accounting Policies that the authority has shortlisted certain assets that
should be considered as the community assets on the basis of the recognition criteria for
Property, Plant and Equipment mentioned in AASB 16, paragraph 7. As per ACT Accounting
Policies, Category 6 mentions about Commercial Plantations of Trees (treasury.act.gov.au
2019). According to the description of this, commercial plantations of trees are where the
primary purpose to plant the trees is to sale. For this reason, trees under these commercial
plantation areas are for the purpose of commercial extraction. It can be observed that the
above discussion is relevant with the provided scenario of Tasmania due to the fact that the
main objective behind the planation of leatherwood trees is to sale the honey from them and
this aspect supports the fact that these trees are used for the commercial purpose by the
companies in Tasmania. It also implies that the government agencies of Tasmania do not use
these trees for other purposes. These are crucial points that need to be considered (Aversano
and Christiaens 2014).
At the time of considering the accounting treatment, it can be seen in the same section
of ACT Accounting Policies that the above-discussed plantation areas along with trees can be
considered as assets but should not be considered as community assets (treasury.act.gov.au
2019). This is because these assets qualify under the definition of ‘commercial planation’;
and for this reason, these assets need to be accounted for complying with the standards of
AASB 141 Agriculture. According to AASB 141, these standards are applied to accounts for

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certain aspects related to agricultural activities; such as biological assets except, agricultural
produce at the time of harvesting, grants from the government and others (aasb.gov.au 2019).
Hence, on the basis of the above discussion, it can be said that the plantation areas along with
the leatherwood trees are eligible for considering as assets; and the companies are needed to
ensure the fact that they comply with the principles as well as standards of AASB 141 while
conducting the accounting treatments of these plantation areas along with the leatherwood
trees (Ouda 2014). These are crucial aspects that need to consider while deciding whether
leatherwood trees are assets or not.
ACT Accounting Policies have provided the criteria for measuring as well as maintaining the
community assets (treasury.act.gov.au 2019). For the purpose of measurement, it is needed to
capitalize the initial cost of planting trees in the value of the land on which the plantation of
trees are done. At the same time, certain rules need to be followed for maintaining or
replacing them. The replacing cost should be expensed at the time of the replacement of small
number of trees, but the cost of replacing and maintaining these assets need to be capitalized
at the time of the replacement of large number of trees. This aspect indicates towards the fact
that the companies are needed to capitalize this large cost as they have to almost replace the
total trees. This type of characteristic can be seen in the assets, but they are not applicable in
the case of community assets (Biondi and Lapsley 2014).
The above discussion has provided me with certain information that is useful to reach to a
conclusion on the given issue. It can be seen from the above discussion that there are certain
reasons for which leatherwood trees can be considered as asses, but they cannot be
considered as community assets; the summary of these reasons are shown below:
 ACT Accounting Policies provides the standards and principles for the accounting
treatment of community assets; and they have mentioned which assets need to be

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considered as community assets and this list does not include any tree. Thus,
leatherwoods trees cannot be considered as community assets in this provided
scenario (Ouda 2014).
 As per the regulations of ACT Accounting Policies, the future economic benefit needs
to be flown towards the state agency in case of community assets, but the future
economic benefits of leatherwood trees flow in the favour of the companies of
Tasmania as these threes are used for commercial purpose. For this reason, they
cannot be community assets (Aversano et al. 2015).
 It is clearly mentioned under the standards of ACT Accounting Policies that any tree
used for the commercial purpose cannot be considered as community assets due to the
fact that they must be considered as agricultural assets. For the same reason,
leatherwood trees cannot be considered as community asset as they are agricultural
assets (Landriani and Pozzoli 2013).
 ACT Accounting Policies have mentioned that the standards of AASB 141 need to be
applied on the trees that are used for the purpose of commercialization and the same
aspect can be seen with leatherwood trees as they accounting treatments need to be
done in accordance with AASB 141. For this reason, they cannot be considered as
community assets (Schuler, Fuchs and Bergmann 2015).
On the basis of my whole analysis and interpretation, I have come to the conclusion that the
leatherwood trees have all the characteristics to be assets and they should be considered as
agricultural assets. However, these trees do not possess the characteristics and other aspects
to be community assets.
Thank you.
Yours Affectionately,

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Jim Payne
References
Aasb.gov.au. 2019. Agriculture. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB141_08-15.pdf [Accessed 15 Mar.
2019].
Aasb.gov.au. 2019. Property, Plant and Equipment. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB116_08-15_COMPoct15_01-18.pdf
[Accessed 15 Mar. 2019].
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Ouda, H.A., 2014. A practical accounting approach for heritage assets under accrual
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