FFSC Day 2 – Session 3
The first session in the afternoon was a panel discussion of three professors from the University of Illinois on using cash versus accrual income.
There is a myth that cash versus accrual “averages out over time”. With surgery of about 1,000 farms from 2001 to 2006, they found:
1. Cash versus accrual was about 50% different in each year and about the same percentage difference for a three and five year totals sit this study indicated it does not average out.
2. Crop inventory changes and differences in depreciation was usually the largest difference.
3. Current ratios have increased from an average of about 2 to 3. Debt to asset ratios have dropped from about 30% to less than 20%. Debt levels have gone up but values have gone up faster. Returns on assets have jumped around due to the volatility of crop and land prices.
4. Income per acre has increased from an average of about $100 to over $300 in 2011.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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