Current issue: 54(1)
Under compilation: 54(2)
For non-industrial private forest (NIPF) owners land with its timber production is an example of a capital asset. Developments in the asset’s value and yield depend not only on forest management but also on other factors that the owner cannot control, for example timber prices and the production circumstances, such as soil and climate. One important basis for decision making related to management strategy and, in the short run, to cutting and silvicultural activities is economic analysis and accounting. The owner has to decide whether to invest more in his property (planting, cleaning, building of forest roads) or disinvest (sell timber or the holding). He has to find ways to increase revenue and cut costs.
However, generally accepted accounting practices for NIPF owners are lacking. Applying business economic accounting principles and forestry accounting traditions, we outline a proposal for a profit and loss accounting and balance sheet for NIPF holdings with a view towards increasing economic awareness among private owners. Key concepts are net profit of the enterprise and calculated profit of the property. Other profit measurements that are used are gross margin, forestry margin, operating margin and operating profit. Calculated profit is based on adjusted net profit. The main concern, however, is to consider the change in the holding’s market value caused by changes in stock volume, quality and price. The contents of the accounting framework development here are applied to three management strategies. The return on investment (ROI) of forestry is compared with other investment alternatives.
The profitability of jointly owned forest holdings in the two northernmost forest board districts of Finland was studied by means of ratio analysis. A time series of profit and loss statements and balance sheets from 33 holdings covering the fiscal years ending 1981–1990 served as the database. The studied area was 348,038 ha, the allowable cut 304,300 m3 per year and the average turnover, deflated by the wholesale price index, FIM 57.6 million per year. The key result obtained was that the average annual profit was FIM 107 per hectare and FIM 110 per m3. The time series showed that the ratios had increased significantly over the calculation period.
The PDF includes an abstract in Finnish.
The profitability of forestry in the context of recent economic developments in Finland suggest a more systematic analysis of the profit and the cost structure of small-scale forestry than is normally made today. The domestic and international pressure on farming emphasizes the development of rural areas by means of other business than agriculture, in practice this may mean forestry. Financing in terms of the new law concerning agriculture requires projects to be profitable. Thus, the profitability of different lines of production, including forestry, needs to be reported more carefully than is the practice today.
A network of forestry bookkeeping farms covering the whole Austria has existed for 20 years. The organization and the operation of the forestry bookkeeping and the cost accounting system is based on the scientific cooperation and exchange of information between the organizations in charge. The practical experience and recommendations based thereon might be useful for Finland, when implementing a country-wide network of forestry bookkeeping and cost accounting.
The PDF includes an abstract in English.