News: Big Relief for Philippine Real Estate Developers
A new global accounting reporting system called IFRIC 15 (International Financial Reporting Interpretations Committee) has threatened to hamper Philippine Real Estate developers by using new accounting rules to realize income from property sales. Under IFRIC 15, which the Philippines agreed to comply with, Filipino developers must only recognize revenues from pre-selling activities once the project is completed.
Since pre-selling is very common in the world of Real Estate Philippines, this would force all Philippine builders to report losses instead of profits starting this coming January of 2009! And what’s even more damaging is that IFRIC 15 should have a retroactive application even to the previous financial statements of the past year!
This would be very damaging indeed to Philippine Real Estate developers. Of course, no investor would want to put their money in a real estate company reflecting losses, even though they’re actually earning quite well in reality. In turn, this would greatly impact the whole Philippine Economy as well, since foreign investors will stay away from a country that reflects a negative growth in its real estate industry.
Fortunately for us Filipinos, four major real estate organizations have successfully appealed the delay of the implementation of this rule to the Securities and Exchange Commission. These groups are the OSHDP (Organization of Socialized Housing Developers of the Philippines), CREBA, SHDA and NREA (National Real Estate Association) headed by my boss, Eton Properties Sales Director Alejandro Manalac. They have suggested that IFRIC 15 be implemented after 3 years, since it would be around the year 2012 where most of the Philippine Condominiums would be finished. By that time, Philippine developers can now appropriately reflect their huge pre-selling revenues on their balance sheets, which means better foreign investment standing for us.
It’s a good thing that the appeal for the delay of IFRIC 15 has stood its ground. I think it is very justified because our real estate industry is quite different from that of the rest of the world – again because we pre-sell our properties 3 to 5 years ahead of completion time. Indeed, a sudden change in accounting principles would be too drastic and harmful to us. Give us the appropriate time to adjust first.. for the good of our Philippine Real Estate industry and our own country!
(credits to Mr. Alejandro Manalac and the News Central newspaper)
Tags: IFRIC 15, Socialized Housing Developers of the Philippines
