Too few transactions, so we give up

There's an interesting disclaimer from the auditors in the beginning of the 2009 financial statements from Amlak Finance, the country's largest Islamic home finance company.

Ernst & Young writes:

"Qualification
The Group's accounting policy is to carry investment properties and advances for investment properties at their fair values reflecting the market conditions at the date of the statement of financial position. At 31 December 2009, the Group's consolidated financial statements include investment properties and advances for investment properties amounting to AED 3,086,261 thousand and AED781,460 thousand, respectively. Management believe that property prices have generally declined since these assets were acquired but are unable to quantify the amount of decline in view of the limited number of transactions currently taking place in the market. Accordingly, the Group has continued to carry such assets as of 31 December 2009 at their acquisition cost."

So, basically they are delaying a potentially huge devaluation of their multi-billion dirham portfolio of properties because there aren't enough transactions to establish a market price. This is another sign that companies are putting off the pain of the property downturn until a future date - which means there could still be a good deal of write-downs to come.

It's also a sign of the difficulties companies have when they use "fair-value" prices. When there's no market for your properties, what are they worth?