Hong Kong Exchange is prohibiting companies that seek approval to list on its stock market from relying on an accounting practice at the centre of accusations by short-seller Muddy Waters against Olam International Ltd.
Olam, a commodities company listed in Hong Kong’s rival financial centre Singapore, has been criticised by Muddy Waters for the way it accounts for assumed future increases in the value of its crops and other so-called biological assets.
Olam has said its accounting is in line with Singapore’s financial standards, which are based on IFRS rules and insist that agricultural assets are valued according to certain models. Analysts have noted that biological gains make up an especially large portion of Olam’s pretax profit.
However, Hong Kong Exchanges and Clearing Ltd seems to be taking a different view on the practice from its Singapore rival. Full story
