A STUDY OF FINANCIAL REPORTING OF CORPORATE REAL ESTATE IN SINGAPORE

Abstract

Real estate assets have long been a significant item in the balance sheets of listed companies. This applies not only to property companies, but to non-property companies as well. As this group of assets requires the commitment of a considerable amount of the companies' equity, users of accounts (particularly shareholders and potential investors) will be interested to know the true worth of the companies' real estate assets. The absence of a set of standardized accounting standards for these real estate assets means that companies are given the liberty to choose the set of accounting policies they deem most suitable for their real estate assets. As a result, real estate assets in financial statements provided by different companies give rise to the problem of incomparability. The purpose of this study is to highlight two of the issues that arise from the financial reporting of corporate real estates, real estate assets classification and valuation. The current accounting practices adopted by listed non-property companies for real estate assets classification and valuation are investigated and the degree of compliance to the local legislation governing financial reporting of real estate assets is examined. The study also reveals that there are considerable variations in the companies' adopted practices in property classifications and valuation in balance sheets. The degree of compliance to the local legislation is also considerably low.