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New regulation postponed in Philippines amid fears about impact on property market
By: Administrator | 12/19/2008 12:51:30 AM
The Philippines real estate sector has been granted a reprieve from the implementation of a new accounting rule which would have significantly affected bottom lines amid a global financial downturn.
The new regulation,which states that property buyers' payments cannot be booked as revenues until projects are completed, would have taken effect in January. It has now been put off until 2012 as it is felt it would have had a negative effect on the property market.
The decision has been welcomed by property developers who have lobbyed hard for it to be deferred.
The rule still recognizes the cash flow from buyers who have yet to get hold of their condominium units or houses but states that the money would have to be recorded as 'deposits from customers' in the liabilities section of the balance sheet instead of revenues on the topline of the profit-and-loss statement.
'This would have affected property firms' bottomlines, and lower profits would have led to less dividends for shareholders, explained a spokesman for the National Real Estate Association which joined with other including the Chamber of Real Estate Builders' Association and the Housing Developers Association, to demand a change.
We warned the government that implementing the rule next year would impact adversely on the industry and could trigger a meltdown in the markets as investors lose confidence in the real estate business from the resultant low income or even loss during the period when the project is under construction,' the spokesman added.
A stock market analyst agreed. 'This will affect the bottom-line of companies which will make it hard to attract investors. Investors look at companies' financial statements to decide whether a company is standing on strong fundamentals,' he said.
'Postponing the rule was a good decision as the country faces a worldwide economic slowdown. We are in a global financial crisis and we need more relaxed accounting standards so as not to hamper companies' ability to borrow money from banks,' he added.
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