Cimic Group Ltd (ASX: CIM) shares are up 14% at the time of writing after it reported a 12% growth in NPAT to $363 million, but the application of new accounting standards will deliver a 38% hit to total equity.
According to a report in The AFR, Cimic's application of accounting standard AASB 15 from January 1 saw total equity fall $1.28 billion to $2.1 billion.
According to the report, revenues can only be recognised when it is "highly probable" a reversal will not occur and costs can only be capitalised if they are expected to be recovered.
Cimic reported a cash flow uptick of 17% for the six months to June 30, 2018 with its net cash position at $1.3 billion, revenue growth of 11% and 2018 NPAT guidance of between $720 million and $780 million confirmed.
Stocks in the building materials sector have struggled with a reduction in building approvals across Australia, with CSR Limited (ASX: CSR) shares down 29% from an early May high of $5.74, and Brickworks Limited (ASX: BKW) or James Hardie Industries plc (ASX: JHX) making only small gains.
