FINANCIAL MECHANISM FOR ASSESSING LAND ASSET IMPAIRMENT UNDER THE INFLUENCE OF DEGRADATION PROCESSES
DOI:
https://doi.org/10.37332/Keywords:
land assets, soil degradation, impairment, financial mechanism, valuation, economic losses, net operating income, asset impairment, econometric model, vegetation indexAbstract
Kostovyat H.I. FINANCIAL MECHANISM FOR ASSESSING LAND ASSET IMPAIRMENT UNDER THE INFLUENCE OF DEGRADATION PROCESSES
Purpose. The aim of the article is to develop a comprehensive financial mechanism for the monetary assessment of impairment of land capital assets of agricultural enterprises under the influence of intensive environmental degradation processes based on the adaptation of the classical income approach and mathematical modelling tools.
Research methodology. The study employed methods of system and structural analysis to examine financial and environmental interrelationships; the income approach to real estate valuation for the capitalization of adjusted net operating income; econometric modelling (multiple regression analysis) to assess the impact of degradation factors (erosion, humus depletion, waterlogging, and salinization) on the market value of land assets; and Thomas Saaty's Analytic Hierarchy Process (AHP) to determine factor weights through mathematical consistency verification and to minimize expert subjectivity.
Findings. A comprehensive financial mechanism for assessing the impairment of land assets caused by degradation processes has been developed, combining the income approach, an integrated assessment of soil degradation, and economic and mathematical modelling. A basic and a modified mathematical model for calculating the integral degradation coefficient ( ) has been formed, integrating non-linear parameters (specifically, the quadratic specification of land flooding for the Transcarpathian region), which ensures capturing exponential drops in asset productivity after reaching critical ecological thresholds.
A four-stage institutional algorithm for data collection and verification has been developed, integrating the regulatory framework of Ukraine (Agrochemical Passports, Form No. 50-sg, and official data of the State Service of Ukraine for Geodesy, Cartography and Cadastre) with satellite-based monitoring of vegetation indices (NDVI), which serves as an additional source of information for identifying degradation processes and initiating extraordinary financial assessments of land assets.
Originality. Methodological framework for assessing the depreciation of land asset impairment have been improved through the integrating environmental indicators of soil degradation with financial models for determining value and the requirements of national accounting standards governing asset impairment.
Practical value. The proposed mechanism allows synchronizing the calculated ecological discount ( ) with the requirements of National Accounting Standard (NP(S)BO) 28 "Impairment of Assets" and IAS 36. A practical scheme of accounting entries (Debit 972 ‒ Credit 101) has been formed for the legitimate write-off of impairment losses and bringing the balance sheets of enterprises into line with the real state of capital, which forms an evidence base for legal claims and calculating the economic efficiency of land reclamation.
Key words: land assets, soil degradation, impairment, financial mechanism, valuation, economic losses, net operating income, asset impairment, econometric model, vegetation index.
References
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9. UkrAgroConsult (2022), Suttievoi dehradatsii vzhe zaznaly blyzko 33% ukrainskykh hruntiv [About 33% of Ukrainian soils have already suffered significant degradation], available at: https://ukragroconsult.com/news/suttyevoyi-degradacziyi-vzhe-zaznaly-blyzko-33-ukrayinskyh-gruntiv/ (access date May 20, 2026).
10. Saaty, T.L. (1980), The analytic hierarchy process: Planning, priority setting, resource allocation, McGraw-Hill, New York, USA, 287 p.
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