IAS 41-Biological Asset Disclosure and Financial Reporting Quality: Evidence from Nigeria

Abstract

The effectiveness of biological assets disclosure under IAS 41 in improving financial reporting quality, particularly in emerging markets with weak institutional frameworks and complex valuation environments became o growing concern. Therefore, this study examined the effect of biological assets disclosure on financial reporting quality of listed agro-allied firms in Nigeria using an ex post facto research design and panel data covering the period 2015 to 2024. A disclosure index based on IAS 41 requirements was constructed through content analysis, while financial reporting quality was proxied using accrual-based measures, and the data were analyzed using fixed effects regression. The findings revealed that biological assets disclosure had a negative and statistically significant effect on financial reporting quality, indicating that increased disclosure did not necessarily improve reporting outcomes due to the subjectivity and estimation uncertainty associated with fair value measurement. In contrast, firm size, leverage, and audit quality exhibited positive but statistically insignificant relationships, suggesting that firm-level characteristics did not significantly influence reporting quality. The study concluded that disclosure alone was insufficient to enhance reporting quality and emphasized the need for stronger enforcement, improved valuation guidelines, and enhanced audit oversight. Consequently, the study recommended that regulatory authorities should strengthen compliance monitoring, provide clearer valuation guidance, and promote capacity building among preparers and auditors to improve the credibility and usefulness of biological assets reporting.