Fair value rule helps Aldar overturn net loss

Aldar Properties, the largest Abu Dhabi-listed property developer, reported a net profit in excess of Dh1 billion for the first half of the year helped by the addition of new land to its "investment pro?perties" pool, reveal the notes to its financial statement.

While the company reported a net profit of Dh1.142bn for the first half, the fair value gain on investment properties was to the tune of Dh1.194bn, meaning that the company's operating profit was in the negative.

The International Accounting Standard (IAS) 40 allows property companies to take the "fair value gains on investment properties" in their income statements. Aldar's document states: "Investment properties increased to Dh6.343bn as of June 30, 2009, from Dh5.149bn as of December 31, 2008, an increase of 23.2 per cent in fair values of our investment property."

Aldar said in a statement to Emirates Business: "Investment properties are measured initially at cost and thereafter stated at their respective fair values.

"Aldar has always taken a particularly conservative view of these 'fair values', and investment properties were stated at a figure significantly below the market value at the given time. The valuation was therefore not significantly affected by the market decrease. Also, the property market in Abu Dhabi, where all of these properties are located, was not as affected as the other areas of the UAE."

Aldar also confirmed that its investment properties portfolio is larger in size than before and is consequently worth more now.

A few other property companies in the UAE also reported profits in their initial reporting periods, invoking the IAS 40 benefits through fair value gain on investment properties, as the property prices were soaring then. However, this avenue has ceased to hold out any more promises, at least for the one or two quarters to come.

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