ADAMA Ltd.2023 Full-Year 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 604 million(approximately $85 million) for the year of 2023 in provisions for asset and credit lossimpairments, including the impairments the Company has disclosed for 2023. For detailsplease refer to Asset Impairment Announcement (Announcement No. 2023-30), AssetImpairment Announcement (Announcement No. 2023-36) and Announcement on AssetImpairment Made by a Controlled Subsidiary for the Fourth Quarter of 2023(Announcement No. 2024-1) disclosed on cninfo.com.cn. These provisions were mainlyrelated to impairment of inventories made during the ordinary course of the Company’sbusiness and one-time impairment of some idle assets, as provided herein.Overview and Financial Impact of Provision for the Assets ImpairmentDuring the year, the Company recorded provisions for asset and credit loss impairmentsbased on "Accounting Standards for Business Enterprises" and the Company’s ownapplicable accounting policies.These provisions, charged to the total profits of the Company during the year, wereamounted to RMB 604 million (approximately $85 million).Further details of the impairments are as follows:
Unit: ‘000 RMB
| Item | Amount |
| Inventories | 256,893 |
| Fixed assets and Construction in progress | 262,077 |
| Intangible assets | 30,923 |
| Credit losses | 54,453 |
| Total Asset impairments | 604,346 |
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 257 million (approximately $36million) for the year. This is 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 Impairment of Fixed Assets and Construction in ProgressThe Company and its subsidiaries, assess at each balance sheet date whether there areany indications that the fixed assets and construction in progress may be impaired. Ifthere is any indication that such assets may be impaired, recoverable amounts areestimated for such assets (recoverable amount is the higher between the assets’ fairvalue less costs to sell and the present value of the future cash flow estimated to bederived from the asset). If the recoverable amount is below the assets’ net cost recordedin the balance sheet, a provision for impairment is made.The total impairment of fixed assets and construction in progress made during the yearwas RMB 262 million (approximately $37 million), out of which one of the controlledsubsidiaries of the Company made a provision of RMB 228 million (approximately $32million) to some idle assets due to changes in the markets and upgrade in technology.
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.The Company made impairments of intangible assets amounting to RMB 31 million(approximately $4.3 million) in 2023.
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.The credit impairment losses provided during the year was amounted to RMB 54 million(approximately $7.5 million).
Explanation on the Reasonableness of Asset ImpairmentsThe aforementioned provisions were mainly due to the impairment of inventories madeduring the ordinary course of the Company’s business and one-time impairment of someidle assets.Based on the current status of the assets, these impairments, some of which non-recurring, serve to correctly present the balance sheet of the Company, truly and fairlyreflects the company's financial situation, asset value and operating results, whilemeeting requirements of accounting standards and related policies.
It’s hereby announced.
Board of DirectorsADAMA LTD.March 27, 2024