RETAILERS are not too happy with the South African Institute of Chartered Accountants demanding they account for the full period of leasing agreements up front.

This requirement would see retailers accounting for a long-term, year-lease agreement — including annual rent increases — in the first year of the lease.

While the changes have no effect on cash flow, they do depress earnings, and retailers and analysts are not impressed.

Iliad Africa’s results for the year to December had to be restated to show an R8m drop in headline earnings a share. Woolworths and Massmart were also forced to make adjustments to the past year’s financial figures and said earnings for this year would be depressed.

South African retailers such as Iliad lease their shops, whereas most overseas retailers own their shops. While it can be argued that as the average lease profile ages, the changes will reflect positively on earnings, analysts still do not like the changes.

Andisa Securities retailer analyst Evan Walker said it was an "obstacle for investors trying to judge the pure economic reality of any corporation".

These objections are not without substance. The nuisance of an accounting blip is substantial, even if the reward is compliance with global practice.