Fletcher Forests moves to market value

By Phil Boeyen, ShareChat Business News Editor

Friday 29th June 2001

Investors should have a fairer idea of what the forest assets of Fletcher Forests (NZSE: FFS) are worth following a change in accounting policies.

The company is changing the way it values its forests from a historical basis to a market valuation basis, giving an expected value of $1.1 billion to its forest estate.

Previously the value was recorded in the Fletcher Group accounts at $1.8 billion.

Chief executive, Terry McFadgen, says the new accounting method uses discounted future cash flows as the basis for determining current value.

"Our forests make up a large part of our asset base, and this change in the way they are valued and reported will provide investors with more relevant information with which to assess the worth of those forests."

Mr McFadgen says that market value accounting for regenerative assets such as plantation trees is the mandatory accounting standard in Australia.

"This change brings us into line with the Australian standard, which we believe will achieve recognition internationally in the near future.

"This will ensure that we are at the forefront of policy developments in this area, and at the same time enable us to improve our level of disclosure to investors."

The company says the change in policy will not impact the carrying value of its subordinated debt in the Central North Island Forest Partnership because the asset is carried at its estimated net recoverable amount, reflecting the likely sale of the partnership's assets in the near future.

The company is also changing the currency used in its accounts from US dollars to New Zealand dollars.

Mr McFadgen says Fletcher Forests has changed significantly over the past few years and processing is now a much bigger part of its business.

"True US dollar activities have diminished in significance and the mix of currencies that impact on our cash flow means that it is now more appropriate that we adopt NZ dollars as the functional currency of our accounts."

Mr McFadgen says the company will progressively migrate its US dollar borrowings to NZ dollars over the next 12-18 months.

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