SGX: Olam practice not used for listing

SGX: Olam practice not used for listing

SINGAPORE - The contentious accounting practice at the centre of Olam International's clash with Muddy Waters has not been used by firms to meet qualifying criteria for a share market listing here.

The practice, which books unrealised fair value gains on biological assets like crops and stock, could give an inflated picture of a firm's financial health.

A wheat producer may take six months to grow its crop, for example.

But every three months, it would have to estimate the crop's value, based on certain assumptions, so there is plenty of scope for rubbery numbers.

But no firm that has sought to list here since 2003, when the biological gains rule came in, has needed to employ it to meet listing criteria, said the Singapore Exchange (SGX).

The SGX has also said it is undecided if it will ban unrealised gains on biological assets being booked for listings.

The practice hit the headlines after short-seller Muddy Waters criticised Olam for the way it accounts for future increases in the value of crops.

Muddy Waters said this gave an inflated view of Olam's profits, and accused the firm of "incompetent accounting, at best".

Analysts have previously said that they have discounted Olam's unrealised gains on its biological assets and that the accusation is not new.

Olam chief executive Sunny Verghese shot back at Muddy Waters, saying the practice of booking unrealised fair value biological gains was in line with Singapore accounting standards.

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