Announcement on Assets Impairment of ADAMA Ltd. During
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The Company and all members of its Board of Directors confirm that all theinformation disclosed herein is true, accurate, and complete with no false ormisleading statement or material omission.
In accordance with the Accounting Standards for Business Enterprises, ADAMA Ltd.(hereinafter referred to as the “Company”), recorded a total of RMB 126 million(approximately $19.8 million) for the first quarter of 2022 in provisions for asset andcredit impairments. These provisions are mainly related to a credit loss provision fortrade receivables in Ukraine and impairments made during the ordinary course of theCompany’s business, as provided herein.Overview and Financial Impact of Provision for the Assets ImpairmentDuring the first quarter, the Company recorded provisions for asset and creditimpairments based on principles of prudent accounting and according to the"Accounting Standards for Business Enterprises" and the Company’s own applicableaccounting policies.These provisions, charged to the total profits of the Company during the quarter, wereamounting to RMB 126 million (approximately $19.8 million).Further details of the impairments are as follows:
Unit: ‘000 RMB
The Company and all members of its Board of Directors confirm that all theinformation disclosed herein is true, accurate, and complete with no false ormisleading statement or material omission.Item
| Item | Amount |
| Credit losses | 701,001 |
| Inventories | 76,,81 |
| Fixed assets | 115 |
| Total Asset impairments | 125,931 |
Basis and Explanation for Credit Impairment LossesThe Company recognizes an impairment provision, which reflects its assessmentregarding the credit risk of accounts receivables on a lifetime expected credit loss basis.The examination for expected credit losses is performed using a model including aginganalysis and historical loss experience, and is adjusted taking into account observablefactors reflecting current and expected future economic conditions.Due to the current events in Ukraine, in order to cover the estimated risk, the Companyhas made an impairment for the expected credit loss related to the accounts receivables
in Ukraine amounted to RMB 107 million (approximately $16.9 million).
Basis and Explanation for Impairment of InventoriesInventories are measured at the lower of cost and net realizable value. If the netrealizable value is below the cost of inventories, a provision for decline in value ofinventories is made. Net realizable value is the estimated selling price in the ordinarycourse of business less the estimated costs of completion, the estimated costsnecessary to make the sale and relevant taxes.An amount of RMB 18.4 million (approximately $2.9 million) in inventory impairment wasprovided in the ordinary course of the Company’s business during the first quarter.
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 isthe higher between the assets’ fair value less costs to sell and the present value of thefuture cash flow estimated to be derived from the asset). If the recoverable amount isbelow the assets’ net cost recorded in the balance sheet, a provision for impairment ismade.During the quarter, the Company has accrued an impairment of RMB 0.6 million(approximately $0.1 million) for fixed assets, which was immaterial to the overallfinancial statements.
Board of Directors’ Explanation on the Reasonableness of Asset ImpairmentsThe aforementioned provisions resulted from non-cash charges due mainly to the creditloss provision related to trade receivables in Ukraine, and impairments accrued duringthe 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 thecompany's financial situation, asset value and operating results, while meetingrequirements of accounting standards and related policies.
By order of the Board of
ADAMA LTD.April 28, 2022