Arabian Centers Company announced that its board of directors has approved the use of the fair value model or the revaluation model to measure real estate and investment properties.
The company expected, in a statement on the Saudi Tadawul, today, Thursday, that the value of the company’s net assets would be positively affected as a result of using this model by an increase of about 10 billion riyals, an increase from about 16 billion riyals as a net asset value registered at the cost option to about 26 billion. riyals registered at market value.
She added that the expected financial impact as a result of using this model will start from the third quarter of the fiscal year 2023 (ending December 31, 2022).
The company indicated that the use of this new accounting policy does not result in any cash flow within the company.
The company decided to move forward using this model according to the International Accounting Standard IAS 40, after the Capital Market Authority allowed the listed companies to use it for the financial periods of the fiscal year starting during 2022 and beyond, as it is the practice most used by major real estate companies globally.
She explained that the adoption of this accounting standard has many positive effects on the company, including that the use of this standard will show the fair value of the company’s investment properties within the financial statements, which will reflect the current market value of those properties in accordance with the professional standards issued by the Royal Society of Certified Surveyors (“RICS”). which are in line with international evaluation standards.
And she continued: “One of the most important positive effects of using this accounting standard as well, is its significant enhancement of the company’s financial position, including the improvement of debt ratios, the rise in net shareholders’ equity and the balance of retained earnings by an amount of about 10 billion riyals (which will increase the book value per share from about 12 billion). riyals to 34 riyals), which will give the company an additional ability to maximize returns for the company’s shareholders and high flexibility in keeping pace with future sector developments and limiting its risks.
Arabian Centers said that the adoption of the fair value model will generally enhance the company’s ability to expand its operations more quickly and effectively, and the ability to adopt new investment opportunities.