The company, one of the country's top four accountants, said it was not accusing associations of massaging their accounts but that the application of new standards would remove the potential for confusion. A single standard could also allow associations to borrow more money, as hidden assets could show up on balance sheets to be used as collateral.
KMPG social housing partner Simon Braid said: "Housing regeneration schemes at the moment don't have accounting guidance to deal with the fact that they are getting more complex."
At present such projects, which involve a blend of new build housing, demolition, sites awaiting construction and refurbishment, are accounted for under a maze of different rules. Associations may apply these standards differently, so schemes can appear more profitable on some balance sheets than others.
"If we look at it we may find different associations adopt different procedures," said Braid. "There could be a situation where income and expenditure accounts are quite significantly affected. It could be that some associations' accounts look better than they are."
Braid is in discussions with the National Housing Federation and the sector's accounting standards working group, SORP, about the need for guidance. He hopes to convince the NHF to commission research to assess the scale of the problem and attempt to outline a possible solution.
Lenders' reactions to the proposals were mixed. Piers Williamson, chief executive of the Housing Finance Corporation, said: "I am all for better accounting standards in the sector. But this is a very difficult number to get right."
He pointed to the problems in accounting for the value of former housing sites that had been bulldozed and were awaiting new construction work. "There are all sorts of ways to create hidden dowries," he said. "It's very important to look at the impact of this, both to maximise lending and to get a true and fair picture of accounts."
Source
Housing Today
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