1MDB revaluation gains for three years in a row

PETALING JAYA: 1Malaysia Development Bhd (1MDB) has revalued its investment properties for three years in a row, netting RM2.7bil in revaluation gains in its latest financial results.

The company has made it a policy to revalue its investment property portfolio annually while it is more common for other property developers to do so once every three years or five years.

In the latest financial period ended March 31, 2013, 1MDB posted a huge revaluation gain of RM2.7bil compared to RM569.9mil in the previous year.

This was also a result of the company’s adoption of the Malaysian Financial Reporting Standards (MFRS) in the latest financial period, from the Financial Reporting Standards (FRS) used previously.

As a result, the group classified the plots of freehold land for the Tun Razak Exchange and Bandar Malaysia township projects as investment property, as at the end of the financial year.

However the detailed blueprints for the TRX and Bandar Malaysia developments have yet to be firmed up, indicating that the actual estimates of the revaluation may differ.

According to to the accounts, at initial recognition, the directors of 1MDB exercised judgement to measure the cost of the freehold land at the value of the contractual obligation.

According to MFRS 140 Investment Property, any changes to the fair value of the plots of freehold land are recognised in profit or loss. The group appointed independent valuer CH Williams Talhar & Wong Sdn Bhd to value its investment properties.

Similar to revaluing its investment properties, 1MDB tests its goodwill for impairment annually or more frequently if events or circumstances indicate that the asset might be impaired.

The group’s goodwill arises mainly from its energy asset entities.