TAIWAN WANTS AVIATION RIGHTS LISTED AS ASSETS OF AIRLINES.

TAIPEI, Feb 1 Asia Pulse - The Ministry of Transportation and Communications is expected to demand within a few days that aviation rights be listed among the assets of Taiwanese airlines in a bid to correct current practices which tend to underestimate the value of companies' net assets, sources said Thursday.

The demand will be made in line with a 2006 revision to the financial accounting standards by Taiwan's Accounting Research and Development Foundation (ARDF), which stipulated that intangibles be listed as business assets.

Although the rule became effective January 1, 2007, most Taiwan businesses still did not include intangibles in their financial statements for the first half of 2007, mainly because most Taiwan accountants have refused to attest to the assessed value of intangibles such as aviation rights in light of the great risks involved.

The situation has resulted in the net value of the assets of Taiwanese airlines being underestimated, raising concerns in Cabinet that the companies could be bought out by foreign investors attracted to their artificially low prices.

In an internal report released recently, the Cabinet pointed to a plan by Singapore Airlines (SGX:S55) and Singapore's Temasek Sovereign Fund to jointly spend HK$7.2 billion (US$923 million) buying stock in China Eastern Airlines (CEA) (SEHK:0670, SSX:600115, NYSE:CEA).

As the state-owned Chinese airlines did not include the value of its aviation rights in its net asset value, the incident was described by critics as tantamount to selling the country's property at a discount, the report said.

Under pressure, Air China and the Hong Kong-based Cathay Pacific Airways offered to spend US$4 billion buying CEA stock, the report said, noting that the price paid was nearly three times higher than ...