21 October 2009
News reports that wrongly claimed Forestry Plantations Queensland had suffered a dramatic downturn in profits in 2008-09 highlighted the complexity of accounting standards for businesses that grew their products.
FPQ Corporate Affairs Manager Kieran Lewis said the news media this week reported that the corporation’s profit had dropped from $85.5 million in 2007-08 to $3.5 million in 2008-09.
“In reality FPQ’s profit – that is, its income from timber product sales minus its operational expenses – was $11.2 million, down from $29.6 million in 2007-08,” Dr Lewis said.
He said the news media had reported the corporation’s operating surplus, which did decline from $85.5 million to $3.5 million, but which included an extremely volatile variable: the change in annual plantation valuations.
“Under Australian Accounting Standard 141 – Agriculture businesses like FPQ that deal with self-generating and regenerating assets are required to treat changes in annual valuations of these assets as income in their financial statements," he said.
For FPQ, the gain in the revaluation of its forests for 2008-09 was $66.0 million, down from a $186.6 million revaluation gain in 2007-08.
But these movements have nothing to do with FPQ’s timber sales, which for 2008-09 and 2007-08 were $72.2 million and $94.4 million respectively.
“The accounting standard is a reporting complexity that makes it difficult for people without accounting experience to see the true commercial performance of a corporation like FPQ.
“We recognised this in our annual report and gave the actual trading result next to the operating surplus with an explanation as to why the two figures varied so profoundly.
“No doubt with the pressure of deadlines, well meaning journalists just didn’t read the next line in the report,” Dr Lewis said.
He said that like most businesses trading during the global economic crisis of 2008-09, FPQ’s profit had dropped for the year, but its overall plantation estate had increased in value.
“Our plantations are now valued at $1.16 billion,” Dr Lewis said.
FPQ's 2008-09 annual report is available here (download 3.18 mB).
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