Accounting reprieve for real estate industry

The International Accounting Standards Board (IASB) has tentatively decided to abandon controversial proposed changes to real estate accounting rules that would have forced property companies to remove property values and rental incomes from their balance sheets.

 

The IASB met last week in London and decided to exempt landlords of investment property from a set of proposed leasing rules, according to lobbying organisation European Public Real Estate Association (ERPA).

 

The new leasing rules would have required that real estate be reclassified as a financial asset, which would mean that property companies would no longer have either rental income in their income statements or property held on the balance sheet. The change would significantly reduce the value of these companies’ reported assets and revenues. ERPA has argued that the changes would “not provide useful information to investors and adversely affect the ability of investors to assess the performance of property and real estate companies”.

 

“We are very encouraged by the decision taken this week,” ERPA’s director of finance, Gareth Lewis, said in a statement. “It shows that the IASB have listened to the views expressed by the industry and recognised that the European real estate sector already has an accounting standard (IAS 40) that is well supported across the world.”