Owned Australian corporate real estate reporting ahead of IFRS 16

Abstract

ABSTRACT International Reporting Financial Standard (IFRS) 16 aims to improve transparency in reporting Corporate Real Estate (CRE) commitments. Aimed at leasehold issues, its introduction may affect CRE ownership as leasing’s off-balance sheet benefits disappear. Ownership results from a large Australian CREstudy are reported. 2016 Annual Reports were analysed, as this predates the standard’s implementation. Results report two owned CRE-related quanta – Property, Plant and Equipment (PP&E) and real estate, in aggregate and by industry sector. Other parameters, like a Corporate Real Estate Ratio (CRER), the real estate to PP&E ratio, and valuation practices are also reported. A total of $5.14 trillion of PP&E was reported ($57.10 billion per firm) and $71.50 billion in real estate ($717.5 million). Financial, Energy, Materials and Consumer Staples sectors had the highest averages. A CRER of 30.4% continued a long-term trend, though individual firms’ ratios within sectors varied markedly. The RE to PP&E ratio, expected to change post-IFRS 16, was an average of 25.4%, also with wide variance for individual firms. Preferred valuation methods matched previous studies with depreciated acquisition cost dominating (72.3%). This is a pre-IFRS 16 baseline to evaluate postimplementation ownership changes and updates previous CRE ownership studies.