Accounting rule considered

Press, 25 July 1989, Page 23

Accounting rule considered

PA Wellington The Society of Accountants is to consider creating an accounting standard to deal with how companies treat transactions completed by deferred settlement. This follows Securities Commission concern on how the proposed deal between Robt Jones Investments and Chase Corporation to buy the Price

Waterhouse building in Auckland was to have been treated in the Robt Jones Investments accounts. "We will certainly have a look at the general terms relating to deferred purchases,” the chairman of the society’s research and standards board, Mr John Hagen, said yesterday. The society does not

have a specific accounting standard that deals with deferred settlement purchases, but companies are required to compile a set of accounts that represent a true and fair picture of their state of affairs. Mr Hagen said any company showing interest as part of the purchase price of an asset would not be showing a true and fair statement of its af-

fairs. Something like this occurred in 1986 when diversified industrial company, Fortuna Corporation, included interest costs as part of the price it paid for an asset and then showed the interest costs as an interest-free loan in its accounts. The accounts were given a clean bill of health by the company’s auditors.