Many listed property firms have begun using new accounting standards, in anticipation of the Stock Exchange of Thailand's adoption of International Financial Reporting Standards (IFRS), starting next year.
Their early adoption of the new system aims to avoid a possibly damaging disruption to their earnings reports when IFRS becomes mandatory.
The new system will have one vital affect on the way property firms account for their revenue. The IFRS will require developers to wait until completed properties are transferred to customers before realising income, rather than booking income gradually as deposits or down payments from buyers are received, as in the past.
Most listed property firms have been operating on the principle of booking revenue gradually, according to a project's advancement towards completion. There has been concern that an abrupt change of accounting systems will result in an apparent tumble in recorded income, when comparing the period after the change to that before. This will particularly affect those property firms that build condominiums because of the length of time to completion and consequent delays in booking revenue.
However, a survey of listed property firms by The Nation has found that most of them have already moved to avoid this impact by changing to the new accounting as long ago as last year. The new rules don't begin to come into effect until next year, and even then, only for small groups of leading firms. Others have been studying the change and believe the impact on their businesses will not be large.
LPN Development's managing director Opas Sripayak said that his company had revised its financial system last year, and now booked revenue only when transferring residential projects to customers. As a result, the introduction of the new accounting system will have no affect on his firm.
"I think this system will be better for investors, who will be able to compare the financial results of property firms more easily, before making decisions to invest," he said.
Major Development's managing director Suriya Poolvoralaks said the new accounting system would have little impact on his company's financial results when it came into effect because most of Major Development's condominium projects would be transferred to customers next year. That time frame matched the scheduled implementation of the new rules, so there would be no delay in booking revenue from on-going projects.
The company is trying to maintain its income by investing in projects that generate fixed income, such as hotels, offices and retail buildings. This will maintain Major Development's total revenue in accounting terms until near the time the system comes into effect, he said.
Property Perfect's chief executive Chainid Ngowsirimanee said his company had already changed its accounting system to follow the new rules, and as a result it will suffer little impact when the change occurs.
Earlier, many analysts predicted that three sectors of listed firms would be most affected by the new accounting standards: agriculture, property and export.
The Stock Exchange of Thailand will implement the new IFRS accounting standards gradually. The first group will be the SET 50 companies, who will adopt the new standards in January next year. The second group, the SET 100 companies, will adopt IFRS in 2013.