Land Under Roads – a Financial Bonanza or Fools Gold

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The report AAS27, declares that Land under Roads (LUR) being the councils property, must be included in their financial statements to assist in efficient management of such lands and accountability statements for the rate payers. This report, instead of enjoying a welcome response from the councils as it would make their financial statement very impressive (at least superficially without costing them anything), has on the contrary encountered widespread scepticism from them, because it ignores the fundamental attribute of LUR, which because of its externalities and legal position are public goods. The report ignores the very fundamental aspects such as, the criteria to define a public good from a private property, these and other related considerations with important implications for the accounting practices have resulted in noncompliance by a vast majority of councils. The justifications to produce such reports for use in general purpose financial reporting are purely arbitrary and are not even required for the existing stock of such land.

The reports shortcomings become obvious from the fact that in the few places (9.5%) where the prescriptions of the report were implemented, the value assigned to their LUR amounted to up to 80% of their total worth. This statistic alone is proof enough as to how representative of a council’s true worth are the financial statements based on such manipulated figures. Legally, LUR, governed by common law and by Legislation, (varying among the states), belong to the crown and dedicated to public use. The law guaranties public’s unfettered right to use the road as a way at any time. Council’s job by legislation is to exercise functions such as construction, care and maintenance of such public roads. Making them nominal owners of their LUR does not give them private ownership rights over their LUR. Rather, it confers only such powers, and duties as specified in...
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