Forum Archive Index - June 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Financial Reporting Standard No.3 "Accounting for Property, Plant and 
Equipment" looks likely to have played a major role in the reported 
profitability of companies reporting their financial year result for any 
financial year ended between 31st March 2002 and 31st March 2003.

In the case of AIA, this new standard is, in effect, what allowed AIA to 
make the recent capital distribution to shareholders, because of the 
associated large revaluation of assets in FY2002.    Details on this 
relatively new New Zealand accounting standard may be found here:

http://www.valuersnelson.co.nz/outlook/1-02/financial.html

Effectively, as I read it,  it means the end of conservatively valued land 
and buildings on company balance sheets.    The associated 'marking 
up' of land values has the ability to put many companies into a position 
where 'on paper' their debt/equity position is much improved.     My 
(non-accountants) view on this document is that from here on out, the 
party is over for land revaluations.  Three years out (three yearly 
reviews are recommended) we will get minor tweaking of land values 
at best.   

Anyone working in this field like to confirm or deny my view?

SNOOPY

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