Olam: Accounting For Biological Assets Case Study Solutions


The “Note on Olam: Accounting for Biological Assets” case study highlights the accounting methods and procedures followed by Olam International Limited, a multinational agribusiness corporation, for its biological assets. Biological assets refer to living organisms or plants used for agricultural purposes. Olam operates in various countries and deals with a wide range of biological assets. The case study discusses the challenges faced by Olam while accounting for biological assets, particularly in determining their fair value.

Case Issue:

The primary issue faced by Olam is the accounting treatment of biological assets. Olam’s biological assets are subject to various environmental and biological factors, which makes their valuation a complex process. The accounting standards for biological assets are also constantly evolving, and Olam needs to keep up with the latest developments to ensure compliance. The case also highlights the challenges faced by Olam in the valuation of its biological assets and the determination of fair value.

Case Analysis:

Olam follows the International Financial Reporting Standards (IFRS) for accounting for its biological assets. The fair value of biological assets is determined by estimating the future cash flows generated by the asset. This estimation process involves various factors such as the expected yield, market prices, and biological factors such as pests and diseases. Olam’s biological assets are subject to several risks, including natural disasters, weather conditions, pests, and diseases. The company needs to factor in these risks while valuing the assets.

Olam uses the cost model to account for its biological assets until they reach the stage of maturity. The fair value model is used after maturity until the assets are sold. The cost model involves recognizing the biological assets at their cost and subsequently recognizing any changes in their value due to biological transformation. The fair value model involves recognizing the assets at their fair value, with changes in fair value recognized in the income statement.

The case study also highlights Olam’s adoption of a three-tiered approach to value its biological assets. The first tier is based on market data, where the fair value is determined based on observable market prices. The second tier is based on assumptions and estimates made by Olam’s management. The third tier is based on unobservable inputs, such as the biological factors affecting the assets.


The case study highlights the challenges faced by Olam in accounting for its biological assets. Olam’s business operations involve dealing with a wide range of biological assets, making the valuation process complex. The constant evolution of accounting standards for biological assets and the need for compliance also pose challenges. The case study shows that Olam has adopted a comprehensive approach to value its biological assets, taking into account the various factors involved in the process.

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To address the challenges faced by Olam in accounting for its biological assets, the company could consider the following recommendations:

  • Olam could review its valuation methods and procedures to ensure compliance with the latest accounting standards for biological assets.
  • The company could explore the use of technology to improve its valuation process by incorporating factors such as real-time weather data and pest and disease forecasts.
  • Olam could consider diversifying its biological assets portfolio to mitigate the risks associated with a single type of asset.

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