The November 2013 issues of Farm Futures Magazine is packed with valuable tips for guiding you to the financial future of your farm.
Farm Management Software Blog
Tags: managerial accounting, farm financial standards council, farm management accounting, accrual accounting, agricultural managerial accounting, Danny Klinefelter, Dick Wittman, Farm Futures Magazine, Top Producer Magazine, Lance Woodbury, integrated software
Over the past two articles we've contrasted the ways farmers produce financial statements and the conflicting goals of maintaining simultaneous farm financial records by cash and accrual.
The conflict is created by these realities:
• Because the IRS allows it, most farmers file cash-basis tax returns.
• As a result, the cash-basis 1040 Schedule F intentionally distorts true farm earnings.
• Few farmers have the training or incentive to prepare accrual financial statements.
Therefore an "adjusted accrual" system (Coordinated Financial Statements) was developed by Tom Frey and Danny Klinefelter at the University of Illinois in the late 70s. Further refined and re-dubbed "Agricultural Financial Reporting and Analysis" (AFRA), this methodology is the heart of the process adopted by the Farm Financial Standards Council.