The 2007 SORP consultation phase has just ended. Whereas the previous updates in 2002 and 2005 were well received, it is going to be much harder to predict the reaction to this draft.
Our expectation is that significant changes will be made to the phrasing of the 2007 SORP, but not to the actual substance. If this expectation holds, the document is going to have a dramatic impact on the financial position of many RSLs. Given the low levels of surplus reported by the sector, relatively small changes to the accounting treatment will have a dramatic impact on the bottom line.
The most significant changes that we expect to be implemented are as follows.
Shared ownership accounting
The draft SORP suggests that the costs of the first tranche disposal should be included in current assets and a profit or loss incurred on disposal. This is very different from the present treatment of deducting the net proceeds from the carrying value of the property, and may lead to earlier recognition of
