Hong Kong's volatile property market and leasehold land system are the last hurdles preventing listed developers from preparing their financial statements using international accounting standards (IAS), according to KPMG.
Under IAS, a company holding a leasehold interest in land in Hong Kong must record it as a lease rather than an investment property.
IAS did not recognise leases as properties, and required companies to reflect any change in the valuation of their land bank in their profit and loss accounts, said Carlson Tong, KPMG partner in charge of property.
Considering the dramatic ups and downs of Hong Kong property prices, that would cause massive fluctuations in the profitability of listed developers, he said. 'It will be extremely difficult for investors to follow these stocks if their results become unpredictable.'
IAS might be acceptable to listed property firms in the United States as its property market was less volatile than Hong Kong and freehold was a common practice, he said.
Mr Tong suggested the International Accounting Standards committee should make provision for Hong Kong's unique situation.