The change in policy will cost between pounds 8m and pounds 9m in 1993. Most of that is due to Spitalfields, although the new treatment will also apply to BICC's other, mostly small developments. In previous years, the group had treated interest on property developments as part of their cost. This meant it was taken directly to the balance sheet rather than being charged in the profit and loss account. In 1992, BICC capitalised pounds 2m of interest, down from pounds 7m the previous year.
A spokesman for the group said the change was 'good practice. Now we have got on top of the situation in property, we believe it is not appropriate to go on forever capitalising interest. It is appropriate and prudent to take it above the line.'
BICC has invested pounds 71m in the Spitalfields development, of which pounds 20m is in share and loan capital and the remainder guaranteed borrowings. A further pounds 17m is due for the lease from the City of London.
'Until the development is more advanced and property values in the City of London over the development period are known, the final outcome is uncertain,' the company said.
BICC has kept the guaranteed borrowings off its balance sheet but Costain, one of the other partners, is to take them into the pounds 56.1m of debt relating to the development in its own accounts for 1992.
Last November, the lenders to the project agreed to extend a pounds 150m facility for the next three years. Many observers believe it is unlikely the site will be developed this century. The pounds 1bn proposal was intended to provide 1.2 million sq ft of offices, shops and houses. The site is used for car parking and a Sunday market.Reuse content