ADAMA Ltd.Asset Impairment Announcement
The Company and all members of its Board of Directors confirm that all the informationdisclosed herein is true, accurate, and complete with no false or misleading statementor material omission.
In accordance with the Accounting Standards for Business Enterprises, ADAMA Ltd.(hereinafter referred to as the “Company”), recorded a total of RMB 97 million(approximately $14 million) for the first half of 2023 in provisions for asset and credit lossimpairments. These provisions are mainly related to impairment of inventories madeduring the ordinary course of the Company’s business, as provided herein.Overview and Financial Impact of Provision for the Asset ImpairmentsDuring the first half of 2023, the Company recorded provisions for asset impairmentsbased on principles of prudent accounting and according to the "Accounting Standardsfor Business Enterprises" and the Company’s own applicable accounting policies.These provisions, charged to the total profits of the Company during the first half of theyear, amounted to RMB 97 million (approximately $14 million).Further details of the impairments are as follows:
Unit: ‘000 RMB
| Item | Amount |
| Inventories | 105,197 |
| Credit losses (reversals) | (8,490) |
| Fixed assets | 690 |
| Total Asset impairments | 97,397 |
Basis and Explanation for Impairment of InventoriesInventories are measured at the lower of cost and net realizable value. If the net realizablevalue is below the cost of inventories, a provision for decline in value of inventories ismade. Net realizable value is the estimated selling price in the ordinary course of businessless the estimated costs of completion, the estimated costs necessary to make the saleand relevant taxes.During the first half of 2023, an amount of RMB 105 million (approximately $15 million) ininventory impairment was provided mainly due to the decline in the market price of certainproducts and other inventory management issues part of the ordinary course of theCompany’s business.
Basis and Explanation for Credit Impairment Losses and ReversalsThe Company recognizes an impairment provision which reflects its assessmentregarding the credit risk of accounts and other receivables on a lifetime expected creditloss basis. The examination for expected credit losses is performed using a modelincluding aging analysis and historical loss experience, and is adjusted taking intoaccount observable factors reflecting current and expected future economic conditions. Ifthere is objective evidence of a recovery in the value of receivables which can be relatedobjectively to an event occurring after the impairment was recognized, the previouslyrecognized impairment loss is reversed.An amount of RMB 8.49 million (approximately $1.2 million) credit impairment losses wasreversed during the first half of 2023, which was immaterial to the overall financialstatements.
Basis and Explanation for Impairment of Fixed AssetsThe Company assesses at each balance sheet date whether there are any indicationsthat the fixed assets may be impaired. If there is any indication that such assets may beimpaired, recoverable amounts are estimated for such assets (recoverable amount is thehigher between the assets’ fair value less costs to sell and the present value of the futurecash flow estimated to be derived from the asset). If the recoverable amount is below theassets’ net cost recorded in the balance sheet, a provision for impairment is made.During the first half year, the Company has accrued an impairment of RMB 0.69million(approximately $0.1 million) for fixed assets, which was immaterial to the overall financialstatements.
Explanation on the Reasonableness of Asset ImpairmentsThe aforementioned provisions resulted from non-cash charges due mainly to theimpairment provision of inventories accrued during the ordinary course of the Company’sbusiness.Based on the current status of these assets, these non-cash impairments serve tocorrectly present the balance sheet of the Company, truly and fairly reflects the company'sfinancial situation, asset value and operating results, while meeting requirements ofaccounting standards and related policies.
It’s hereby announced.
Board of DirectorsADAMA LTD.August 31, 2023