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 275 million(approximately $39 million) for the first nine months of 2023 in provisions for asset andcredit loss impairments. These provisions are mainly related to impairment of inventoriesand credit loss impairment of accounts receivables made during the ordinary course ofthe Company’s business, as provided herein.Overview and Financial Impact of Provision for the Asset ImpairmentsDuring the first nine months of 2023, the Company recorded provisions for assetimpairments based on principles of prudent accounting and according to the "AccountingStandards for Business Enterprises" and the Company’s own applicable accountingpolicies.These provisions, charged to the total profits of the Company during the first nine monthsof the year, amounted to RMB 275 million (approximately $39 million). The Companyprovided for asset impairments amounting to RMB 97 million (approximately $14 million)in the first half of the year and RMB 178 million (approximately $25 million) in the thirdquarter.Further details of the impairments provided in the first nine months period are as follows:
Unit: ‘000 RMB
| Item | Amount |
| Inventories | 218,801 |
| Credit losses | 46,205 |
| Fixed assets | 4,717 |
| Intangible assets | 5,408 |
| Total Asset impairments | 275,131 |
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 sale
and relevant taxes.The Company provided for inventory impairment of RMB 114 million (approximately $16million) in the third quarter, reaching a total of RMB 219 million (approximately $31 million)for the first nine months period. This is mainly due to the decline in the market price ofcertain products and other inventory management issues part of the ordinary course ofthe Company’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.Credit impairment losses provided amounted to RMB 55 million (approximately $7.6million) in the third quarter. As an amount of RMB 8.5 million (approximately $1.2 million)credit impairment losses was reversed during the first half of year, the total of creditimpairment losses provided in the first nine months period reached RMB 46 million(approximately $6.4 million).
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 nine months period, the Company has accrued an impairment of RMB 4.7million (approximately $0.66 million) for fixed assets, which was immaterial to the overallfinancial statements.
Basis and Explanation for Impairment of Intangible AssetsThe Company assesses at each balance sheet date whether there is any indication thatthe intangible assets with a finite useful life may be impaired, and if such indication exists,the Company calculates the recoverable amount of the asset. When the recoverableamount of an asset is less than its carrying amount, an impairment loss is expected to berecognized to reduce the carrying amount to the recoverable amount.Impairment of intangible assets amounting to RMB 5.4 million (approximately $0.75million) was made in the third quarter, which was immaterial to the overall financial
statements.
Explanation on the Reasonableness of Asset ImpairmentsThe aforementioned provisions resulted from non-cash charges due mainly to theimpairment provision of inventories and credit loss impairment of accounts receivablesaccrued during the ordinary course of the Company’s business.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.October 31, 2023