European REITs Embrace International Financial Reporting Standards

4/13/2011 | By Matthew Bechard

Gareth Lewis, director of finance for the European Public Real Estate Association, spoke with during REITWise 2011: NAREIT's Law, Accounting & Finance Conference in San Francisco about financial reporting standards for European REITs.

Lewis said that REITs in Europe have undertaken a huge effort to adopt international reporting standards and each of the member states have come from a different starting position in terms of actually adopting those standards.

Some had already adopted International Financial Reporting Standards (IFRS) before they came on board in 2005, others didn't have that far to travel, and he said some countries didn't think about it until they were mandated in 2005.

"I think it's fair to say that in the last 10 years the European sector has really made a huge and successful effort in adopting IFRS reporting in a consistent and comparable way," Lewis said.

Of those countries that are further along in the financial reporting adoption process, Lewis said that those leaders come from places like the United Kingdom, France and the Netherlands. "It tends to be the larger countries, but having said that there are some small countries that have some very high standards of reporting, like Belgium and Scandinavia," he said.

Lewis said the sentiment among European property leaders is that they agree with the need to have an international set of accounting standards. "I think it's more the fact that we accepted it's a reality and we've worked very hard to make it work and to report in a consistent and comparable manner."

He added that initially their efforts were focused on ensuring consistent application among their sector in terms of IRFS reporting. "Now, I think because we've reached this place where we're comfortable with where we are, we've shifted the focus to the best practice recommendations," Lewis said.

However, Lewis said that EPRA's members have expressed concern with the fact that a rush to adopt international standards could result in some irrational decision-making.

On another note, Lewis discussed sustainability efforts among the European listed property market. He said that they see it as a way of reducing the cost of capital for the sector both now and in the future.

"We've been spending the last year and a half working on developing some best practices recommendations for sustainability reporting and it's going very well," he said. Lewis added that they aim to do a soft launch among their members in the summer and a final launch in the fall.