‘Last-minute’ rush expected on standards

Recent changes to Australian Accounting Standards may affect the financial statements of companies with property assets.

The changes are a result of the harmonisation of Australian to international financial reporting standards and come in to effect for accounting periods beginning on or after January 1 2005.

There are more than 40 new standards, and while many are similar to existing standards, others are highly specialised and will apply to a select group of companies.

Another group of new standards will affect all companies, according to Deloitte partner Peter Rupp, and may radically change the way companies’ financial statements are presented.

“Timing has become critical, as by June year’s end companies may need to cut an opening balance sheet position for July 1 2004,” Mr Rupp said.

“This will start their first converted comparative period as the new standards come into effect on or after January 1 2005.”

There are some significant new standards for companies with properties and/or plant and equipment on their balance sheets, whether operational or held for investment, Mr Rupp added.

Among the practical issues that need to be addressed are: deciding whether a company wanted to carry PP&E at cost or valuation; distinguishing investment properties from PP&E and being alert to specific issues arising where this is an element of ‘owner occupation’ in a property held from investment purposes; and understanding the impact of moving away from a portfolio approach to valuing properties and to the potentially significant impact this can have on earnings in a falling market.

Mr Rupp recommended that companies considering their options seek advice sooner rather than later from specialist IFRS accountants and valuation professionals.

Hegney Property Valuations general manager Nathan King expects a last-minute panic as companies realise they needed to address the new standards.

With the changes only recently reaching public attention, Mr King said an urgency had been created for companies with significant property to firstly obtain appropriate advice, and secondly valuations if required.

“The valuation industry has limited capacity to meet the June 30 deadline with the expected influx of valuations, and companies that fail to act on the new standards run the very real risk of limiting their options for financial reporting,” Mr King said.