Accounting reprieve for real estate industry

Landlords on course to win the day over rules that would have forced them to exclude property values and rental incomes from their balance sheets and income statements.

An international account body looks set to abandon controversial plans to real estate accounting rules that would have forced property firms to exclude rental incomes from their income statements and kept real estate values balance sheets.

Meeting last week in London, the International Accounting Standards Board (IASB), tenatively agreed to exempt landlords from a set of proposed leasing rules that would have required real estate to be reclassified as a financial asset.

According to lobbying organisation European Public Real Estate Association (ERPA), the rules would have meant property companies could no longer show rental income in their income statements or allow property to held on the balance sheet.

The change would significantly reduce the value of these companies’ reported assets and revenues. ERPA has argued 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.”