SPCs For Buying Land To Be Brought Onto Developers' Books

TOKYO (Nikkei)--The Accounting Standards Board of Japan decided Tuesday to continue discussions toward requiring firms to include special-purpose companies for developing real estate on their consolidated financial statements.

A final decision is expected as soon as this year, with the requirement to take effect from April 2012.

Real estate firms use special-purpose companies to develop large buildings and condominiums without bloating their balance sheets. In addition to transferring their own land, companies are increasingly setting up development-oriented SPCs that buy land from external sources.

The nation's four top real estate companies had some 2.73 trillion yen worth of assets tied up in off-book special-purpose vehicles last fiscal year. With the popularity of development SPCs growing, investors are worried that balance sheets do not fully reflect companies' underlying health.

The new rule would not apply to SPCs handling assets transferred from the parent.

(The Nikkei July 7 morning edition)