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Kumpulan Fima Berhad
(11817-V)
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Key Audit Matters (cont’d.)
Impairment of property, plant and equipment and biological assets (cont’d.)
(Refer to Note 13, Note 15 and Note 42(i))
The Ministerial Order was issued as certain parts of the areas on which right for cultivation of oil palm was issued to PTNJL, were
originally designated as forestry areas. The administrative irregularities committed by certain officers of the Badan Pertahanan
Nasional Provinsi Kalimantan Timur resulted in the improper issuance of right to PTNJL in 2003.
On 21 October 2016, PTNJL filed an application with the Pengadilan Tata Usaha (“PTUN”) in Jakarta, Indonesia to seek an order
to annul the Ministerial Order. In the said application, PTNJL also sought an order from PTUN to postpone the enforcement of the
Ministerial Order until the full and final determination of the matter by the Indonesian courts.
On 13 June 2017, the State Administrative Court delivered an oral judgment and dismissed the application filed by PTNJL to annul
the Ministerial Order. On 21 June 2017, PTNJL had filed an application to the Court of Appeal against the decision of the State
Administrative Court.
The outcome of the appeal can only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the Group. As the State Administrative Court had dismissed the application to annul the Ministerial Order,
the Group may not be able to recover the carrying amounts of the property, plant and equipment and biological assets related to the
right for cultivation of oil palm of the affected area, and has recorded an impairment loss of RM44.7 million in respect of the related
property, plant and equipment and biological assets. Given the significance of the matter and the judgement and estimates involved
in the assessment of the recoverable amounts of the property, plant and equipment and biological assets, we identified this as an
important area for our audit.
In addressing this area of concern, we:
(a)
reviewed the Ministerial Order, the Group’s correspondences and minutes of meetings with its legal advisers;
(b)
discussed the Ministerial Order with management personnel responsible for managing the Group’s legal matters and with
those charged with governance;
(c)
considered the objectivity, independence and expertise of the legal advisers engaged by the Group;
(d)
evaluated the management’s judgments on the possible effects of the Ministerial Order and the recoverability of the related
property, plant and equipment and biological assets; and
(e)
evaluated the adequacy of the disclosures of the matter giving rise to the impairment loss.
Revenue recognition
(Refer to Note 3 to the financial statements)
Revenue from production and trading of security and confidential documents contributed to approximately 43% of the Group’s
revenue. Given its magnitude and significant volume of transactions involved, revenue recognition is identified as a key audit matter
in our audit. There is a risk that revenue could be subject to misstatement, particularly in respect of the timing and amount of revenue
recognised.
Independent auditors’ report
to the members of Kumpulan Fima Berhad
(Incorporated in Malaysia)