This case study deals with assessing the value of livestock in the financial statements of a dairy farming business. With a global market predicted to reach US$494 billion by 2015 (GIA 2012), dairy farming is the largest sector of world agriculture production. It is an important industry in many countries. For example, in the USA, dairy farming contributes more than $160 billion in economic output and provides more than 90,000 jobs (DFT 2012).
The subject matter of the case study is a small dairy farming business in Pakistan, a country that is the fifth largest producer of milk in the world (FAO 2009). The case study describes a disagreement between the management and the auditors about the initial recognition and subsequent measurement of crossbred cattle in the financial statements of the business. The aim of this case study is to help students understand the issues involved in assessing the value of livestock in the light of the guidance provided by the International Accounting Standard on Agriculture (IAS 41). The case study can also be used to help students understand the differences between the requirements of U.S. GAAP and international accounting standards, as well as the possible reasons for these differences.