Housebuilding is an anomaly in the way it accounts for its land holdings, reports the Financial Times.
It says the practice of accounting for land holdings at their original cost means net asset value does not fluctuate with the value of the assets.
This leads to considerable “murkiness” in other parts of the accounts. Margins, for example, are more difficult to read, it says. Many institutions say they do not have a problem with the anomaly; it is simply how the industry works, they say. They want to feel confident that the housebuilders are themselves keeping an eye on real net asset values so they can ensure steady returns.
References: Financial Times 12/05/04 page 26
