The announcement does not give a reason for this decision, however, Saudi Arabia lacks liquid markets. Also, the currently applied SOCPA standards require assets to be valued at cost when acquired with no subsequent revaluation, so valuation expertise might not be as comprehensive as yet.

For intangible assets, the CMA decision is of little impact as the revaluation model under IAS 38 states that intangible assets may only be carried at a revalued amount (based on fair value) less any subsequent amortisation and impairment losses if fair value can be determined by reference to an active market.

Requiring companies to adopt the cost model for property, plant, equipment, and investment property is an allowable option under IAS 16 and IAS 40. Consequently, the resulting financial statements of Saudi companies will be in compliance with IFRS.

The CMA notes, however, that the companies affected should disclose estimated changes in the fair value of their assets in the footnotes of their financial statements. Also, the CMA states that it will revisit the decision after three years to see whether the practice of only allowing the cost model should be continued or whether revaluations will be allowed.

Please click for the announcement on the CMA website.