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Financial watchdog refers K+S to German audit office over USD2.4-billion potash impairment

February 20/2021

MOSCOW (MRC) -- K+S (Kassel, Germany) says the German Audit Office for Accounting (DPR) is examining the company’s consolidated statements after Germany’s financial watchdog, the Federal Financial Supervisory Authority (BaFin), found potash-related impairment charges of about EUR2.0 billion (USD2.4 billion), said Chemweek.

The DPR is studying financial statements for the periods ending 31 December 2019 and 30 June 2020. At the request of BaFin, the DPR “has announced that it will examine the accuracy of the impairment losses recognized. For this purpose, DPR requests the company’s cooperation and the submission of documents,” K+S says. The company states that it “comprehensively complies with this request and has already provided the documents requested by DPR.” It will cooperate fully in the examination and provide further information upon request “with maximum transparency,” K+S adds.

According to K+S, BaFin contacted DPR stating an examination was required as assets in the company’s Europe+ operating unit reported in the consolidated financial statement ending 31 December 2019 and in abbreviated financial statements ending 30 June 2020, in particular non-current assets, “may be overstated."

“BaFin has concrete indications that this impairment requirement may not have been determined correctly and should have been recognized in full or in part at an earlier date. Other asset items may also be affected by the need for an impairment loss,” K+S says. The DPR has indicated that it reserves the right to extend the examination to further items if further indications of incorrect accounting become known, it says.

In November last year K+S announced it had adjusted its long-term assumptions for its potash business, essentially related to the long-term development of potash prices. An adjustment of the weighted average cost of capital also became mandatory. “Overall, this resulted in a non-cash, one-off impairment loss of around ˆ2 billion on assets in the Europe+ operating unit,” it says. The impairment loss was recognized in the company’s third-quarter 2020 financial statements “and had a correspondingly negative impact on adjusted consolidated earnings after tax and ROCE, but did not result in a cash outflow,” it says.

The executive board at K+S “is convinced that the impairment loss has been recognized appropriately and in compliance with all relevant accounting standards,” it states, adding that the board “assumes that it will be able to invalidate BaFin’s indications.” The company’s supervisory board “also does not anticipate any indications to the contrary at present. It has immediately established committees and processes to monitor the occasion-related examination,” it says.

As per MRC, K+S (Kassel, Germany) and Remex, a subsidiary of Remondis Group (Lunen, Germany), are bundling their waste-management activities in a new joint venture (JV) called REKS, K+S says. The partners plan jointly to tap into the rapidly growing market for reutilization and disposal, as well as sustainable waste-management solutions.

We remind that Russia's output of chemical products rose in November 2020 by 9.5% year on year. At the same time, production of basic chemicals increased in the first eleven months of 2020 by 6.6% year on year, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-November 2020 output. November production of polymers in primary form rose to 896,000 tonnes from 852,000 tonnes in October. Overall output of polymers in primary form totalled 9,240,000 tonnes over the stated period, up by 17.1%  year on year.
Author:Anna Larionova
Tags:chemical fertilizers, petroleum products, petrochemistry, Germany, Russia.
Category:General News
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