Accounting Treatment of Trees as Assets in the Honey Industry

This article discusses the accounting treatment of trees as assets in the honey industry, specifically focusing on the case of Leatherwood trees in Tasmania. It explores the importance of trees as raw materials for honey production, the principles of accounting for cultural and heritage assets, and the need for disclosure in financial reporting. The article also highlights the impact of bushfires on the honey industry and the role of the government in protecting cultural and heritage assets.

Masters of Accounting

To:
From:
Date: 18/03/2019
Dear Terry Tudor,
Trees are considered to be assets for an economy because it not only maintains the ecological
balance but also provides essential raw materials to the organizations. Leatherwood flowers
are considered to be a significant resource for the honey industry of Tasmania because 70%
of the honey of the state is produced by using Leatherwood. In Tasmania, produced honey
worth above $10 million at the bulk price and even more at the retail prices. It is being found
that the honey industry of Tasmania underwent recently its worst season after bushfires in 35
years which destroyed 190000 hectares and a large number of Leatherwood trees (Burgess,
2019,). It is expected that it would take more than 100 years for recovering from the damaged
state. The destruction imposed a significant impact on the honey industry. The production of
the industry decreased down to 75% because Leatherwood trees are important for the
production of honey and its flowers annually. The Australian Accounting Standard Board
states that all the organizations should disclose all the assets in their annual report. The honey
industry has to consider the Leatherwood trees as assets because it provides flowers that are
being used for production.
The accounting principles also states that the trees as a cultural and heritage asset should be
included in the balance sheet. The principle explains that the assets are to be used in practical
situations. Assets are being utilized for generating sales revenues and expanding business
operations. Leatherwood trees can be categorized as tangible assets because it is in the
physical form that is being utilized by the honey industry. The organizations also report on
their cultural performance and position, incorporating the qualitative information and
financial information on values. The cultural assets consist of both intangible measures and
tangible measures of value. In Tasmania, there are many industries consisting of honey
industry which uses trees for producing their products and services. The organizations have to
depict the source of their raw materials such as furniture in their annual report (Burgess,
2019). The industry such as honey industry cannot carry out their business operations without
the use of Leatherwood trees. The government of Tasmania can consider trees as the cultural
1

assets which need to be taken care of. The cultural and heritage assets need to be accounted
in both cultural and economic terms and there is no existence of separate accounting standard
for their recognition, accounting treatment, measurement, evaluation and reporting of the
management accountability (Tasmania, 2017).
The accounting conventions consisted of conservatism, consistency, materiality and full
disclosure. The conventions states that the same accounting principles should be used, there
should be no materiality and full disclosure of all the information. Assets are an item of
values such as equipment and properties that a company own or lease for operating a
business. It helps in creating value in the business. Goodwill, customer relation and
intellectual property are considered to be an asset of an organization. Assets are very
important for an organization as it can help in generating revenue, increasing the value of the
business and facilitate the running of the business (Ramirez, 2017,p.410). Companies can
transfer and sell their assets or may use for reducing their tax bill that can help in increasing
the efficiency of the business. If an organization has a good understanding of its assets then it
could help in reducing the risk of the business (Hillier et al., 2016, p.264). An owner can
protect his business from safety and health risks by maintaining production machinery.
Intangible assets need to be safeguarded because it can help an organization from
infringement. Tangible assets are the most important resource for small business. It is
considered to be fixed operating resources that a business can use over a long time period,
like equipment and properties. Small business's fixed assets represent a remarkable portion of
it and that can be captured on the balance sheet. The value of some fixed assets also decreases
as they age.
The stakeholders of the organizations need adequate information about the performance of
the organization. The financial reporting should provide significant information about the
financial position and performance that can be used by the investors to make their decisions.
The destruction of Leatherwood has led to a huge loss for the honey industry. Thus, the
honey organizations have to provide data regarding the losses and its appropriate reasons.
Qualitative information also needs to be reflected in the annual report (Annual Report, 2017).
The qualitative characteristics consisted of four principles that are comparability, reliability,
relevance, and understandability. There is no accepted accounting or legal definition of
cultural and heritage assets. The reporting and measurement of some heritage assets types are
problematic, despite the fact that represents undoubtedly values to the stakeholder. It can be
measured in cultural terms but cannot be rendered satisfactorily in economic terms.
2

The conceptual framework needs that the asset is being controlled by an organization and it is
being recognized in the financial position statement when it is expected that the future
financial benefits would flow to the organization. The asset has a value or cost that can be
reliably measured. The trees have its value that can be measured as per the price rate in the
market. Dismissing the utility of imposing the economic values on the cultural assets are
considered to be an accounting fiction (Holton, 2012, p.195). The separate recognition of
assets classes is referred to as the community assets which is accessible and publicly owned
intangible and tangible assets for which the treatment of accounting should differ
substantially from that of the useful assets in which the flow of revenues can be measured
feasibly. The cultural and heritage assets should be depicted on the off-balance sheet which is
being categorized as public goods (Powers and Needles, 2012, p.622). It is not appropriate for
applying conventional accounting to the reporting and measurement of the non-commercial
assets for corporations whose main function is to meet cultural and social goals, not
economic objectives.
The Australian Accounting Standard has considered that all the cultural, community and
heritage assets are to be valued in the financial terms. The economic valuation should be done
by the organization for the cultural and heritage assets. The economy values that are being
allocated to heritage assets that are arbitrary essentially in nature and it cannot provide useful
information for the decision making purposes to the users (Horngren, 2013, p.133). The
conventional financial reporting methods in case of cultural and heritage assets failed to
provide significant information to the stakeholders that consisted of qualitative characteristics
for reporting and measuring the non-operational cultural assets. Further research is being
needed for developing a set of principles that will assist to provide a framework for the metric
of sensitive-context and specific cultural values. The Tasmanian trees should be recognized
as assets because they are the major source of raw materials for many organizations (Kieso
and Kieso, 2013, p.396). The honey industry of Tasmania uses Leatherwood flowers for the
production of honey. Thus, the accounting of the Leatherwood as assets in the financial
position statement needs to be done by the organizations. The financial reporting should
clearly depict all the information that is being needed by the stakeholders. The government
also considers Leatherwood trees as the cultural and heritage assets which need to be
protected for the welfare of the people. The government also funded the organizations for
recovering the costs incurred due to the bushfires.
3

References
Annual Report (2017). Annual Report.[online] Sttas.com.au. Available at:
https://www.sttas.com.au/sites/default/files/media/documents/annual-reports/170329-
Forestry-Tasmania-AR_2016-17_web.pdf [Accessed 18 Mar. 2019].
Burgess, G. (2019). 'It's just a disaster': Fires deal a massive blow to honey industry. [online]
ABC News. Available at: https://www.abc.net.au/news/2019-02-05/tasmanian-bushfires-
burn-leatherwood-in-blow-to-honey-industry/10776606 [Accessed 18 Mar. 2019].
Burgess, G. (2019). 'It's just a disaster': Fires deal massive blow to honey industry. [online]
ABC News. Available at: https://www.abc.net.au/news/2019-02-05/tasmanian-bushfires-
burn-leatherwood-in-blow-to-honey-industry/10776606 [Accessed 18 Mar. 2019].
Hillier, D., Ross, S., Westerfield, R., Jaffe, J. and Jordan, B. (2016). Corporate finance. 6th
ed. New York, N.Y.: McGraw-Hill Education, 221-385.
Holton, R. (2012). Global Finance. 10th ed. Hoboken: Taylor & amp; Francis, 115-315.
Horngren, C. (2013). Financial accounting. 3rd ed. Frenchs Forest, N.S.W.: Pearson
Australia Group, 95-225.
Kieso, D. andKieso, D. (2013). Intermediate accounting. 6th ed. Hoboken, NJ: Wiley, 332-
479.
Powers, M. and Needles, B. (2012). Financial accounting. 5th ed. Mason, Ohio: South-
Western Cengage Learning, 596-772.
Ramirez, E. (2017). Financial Management. 3rd ed. Hauppauge: Nova Science Publishers,
Inc, 210-426.
Tasmania (2017). Tasmania. [online] Brandtasmania.com. Available at:
https://www.brandtasmania.com/assets/brandtasmania_factbook_2013.pdf [Accessed 18 Mar.
2019].
4