This article is from the Australian Property Journal archive
ING Real Estate Entertainment Fund is opposing a proposal by the corporate regulator for an alternative accounting treatment for the gaming and liquor licenses held by the fund’s properties.
The Australian Securities and Investments Commission’s proposed accounting treatment does not affect the market value of those properties and will not affect compliance with any of the financial covenants under the fund’s debt facilities.
However IEF’s CEO Daniel Hargreaves said the fund does not accept the validity of the alternative treatment and this view is also supported its auditors, Ernst & Young.
He said ASIC’s proposal would impact the classification of assets between investment properties and intangible assets within financial reports and may reduce reported net assets.
IEF estimates that adopting ASIC’s proposal would reduce approximately 1 cent per unit in net asset value and a reduction of approximately 23 cents per unit in net tangible assets.
The reported net asset value and net tangible assets (using IEF’s current accounting treatment) at December 31 2009 were both 65 cents per unit.
“ASIC proposes that the gaming and liquor licences be separated from the land and buildings and accounted for at initial cost less any accumulated impairment charges. Under the proposal, rent received by IEF would have to be dissected into rent referable to the land and buildings, and that referable to the licences. The fair value of the land and buildings would then have to be calculated by reference to the rent generated by the land and buildings only.
“Under the ASIC proposal, the licences would be carried at cost less any accumulated impairment charges, and may not be revalued above cost. Consequently, reported net assets may be lower than under IEF’s present accounting policies,” he added.
“IEF believes that its current accounting treatment is correct and in accordance with the requirements of Australian accounting standards. It has received written advice from its auditors, Ernst & Young, confirming its accounting treatment,” Hargreaves concluded.
The matter could be referred the matter to the Financial Reporting Panel.
Australian Property Journal
