CMA allows listed firms to use machinery revaluation model 

Logo of The Capital Market Authority (CMA) 

The Capital Market Authority’s (CMA) board of directors issued a decision to allow listed companies to use the revaluation model to measure machinery and equipment for financial periods starting from 2025 or later.

In addition, listed companies are required to continue using the cost model option for measuring intangible assets for the next two years, starting January 1 of the upcoming year, the regulator said, in a statement.

This decision reflects CMA's role in regulating and overseeing the activities of entities under its supervision and ensuring full disclosure of information related to securities and their issuers.

According to the decision, CMA will assess the appropriateness of continuing to use the cost model to measure intangible assets by the end of 2026 or consider permitting the revaluation model. CMA has also established specific requirements for using the revaluation model to measure machinery and equipment.

One of the most prominent requirements and controls approved by the Authority's board for using the revaluation model to measure machinery and equipment, is that machines and equipment are evaluated by a minimum of two evaluators, with the lowest value being taken when preparing the annual financial statements and when using the revaluation model for the first time, provided that the evaluators are appointed by a decision of the company's board of directors and after the recommendation of its audit committee, provided that the appointed evaluators hold fellowship membership from the Saudi Authority for Accredited Valuers.

The decision also requires the audit committee in listed companies to monitor the valuation process and its results, reporting any observations to the Board of Directors. Additionally, interim and annual financial statements must include a disclosure of reconciliations concerning differences in assets, net assets, net income, and comprehensive income between the revaluation model and the cost model. Furthermore, there are other regulations related to disclosing the results of the valuation process at least 30 days before the beginning of the first financial period in which the model is applied. This disclosure must include relevant items, policies, and any significant gains or losses arising from changes in revaluation.

In 2016, CMA’s board approved the obligation of listed companies, when starting to apply international accounting standards, to use the cost model option to measure real estate, machinery and equipment, investment properties and intangible assets for a period of three years from the date of application of international standards, which began at the beginning of the fiscal year 2017, before issuing another decision at the end of 2019 to allow listed companies to use the fair value or revaluation model to measure real estate and investment properties for the financial periods of the fiscal year starting during or after 2022, while continuing to oblige listed companies to use the cost model option to measure machinery, equipment and intangible assets for a period of five years starting from Jan. 1, 2020, provided that CMA studies the appropriateness of continuing to report on the use of this model upon the expiration of this period or the appropriateness of allowing the use of the revaluation model option.