The Hong Kong Society of Accountants (HKSA) will not follow a controversial international accounting treatment which will make property companies' profits far more volatile. The accounting regulator's president, David Sun Tak-kei, yesterday said that it would adopt International Accounting Standard 40 (IAS-40) in Hong Kong but not its most controversial part. 'We will not follow the part which requires companies to put annual changes in the valuations of their property holdings in the profit and loss account instead of the present practice of putting the changes into balance-sheet reserves,' Mr Sun said. In March last year, the standard caught the attention of Hong Kong investors after London-listed Hongkong Land Holdings, which applies the IAS, reported a US$416 million loss, stemming from a US$600 million valuation deficit on its property holdings. Many Hong Kong property developers voiced their opposition to the adoption of the new standard, forcing the society to postpone a consultation paper late last year. Mr Sun said the new valuation treatment might be suitable for other markets, where the property market was more stable, but not for Hong Kong, where prices fluctuated all the time. 'If the HKSA adopted such rules, the profit of many property developers would become volatile,' he said. Due to the slump in Hong Kong property prices, many would have to book revaluation deficits. The society's financial accounting standards committee chairman, Roger Best, said Hong Kong was not alone in expressing concerns about the controversial standard, and that Britain had also decided against adopting the valuation sections. Mr Best said the HKSA planned to require companies to express valuation changes in a separate income statement to enhance transparency but this would not affect profit figures. Meanwhile, Mr Sun said the HKSA would follow another international accounting standard treating share options as expenses.