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DGAP-Adhoc: K + S Aktiengesellschaft: Final FREP determinations do not trigger any value adjustments

DGAP-Ad-hoc: K + S Aktiengesellschaft / Key word (s): Miscellaneous
K + S Aktiengesellschaft: Final FREP determinations do not trigger any value adjustments

25.11.2021 / 21:57 CET / CEST
Publication of inside information according to Article 17 of Regulation (EU) No. 596/2014, transmitted by DGAP – a service of EQS Group AG.
The issuer is responsible for the content of this announcement.

The German Audit Office for Accounting eV (“DPR”) today submitted its final audit findings to K + in the process of auditing the consolidated financial statements of K + S as of December 31, 2019, together with the associated group management report and the abridged consolidated financial statements as of June 30, 2020, together with the associated interim management report S sent.

In the opinion of K + S, the final determinations do not result in any need for adjustments for the valuations of the cash-generating unit Potash and Magnesium Products (“CGU Potash”) in the above financial statements. The preliminary determinations on the consolidated financial statements as of December 31, 2019, that the value in use of the CGU Kali was not determined reliably and significantly too high and thus the recoverability was not proven, are no longer included in the final determinations of the FREP. The preliminary FREP determination regarding the abridged consolidated financial statements as of June 30, 2020, that the recoverability of the net assets of the CGU Kali has not been proven, is no longer included in the final determinations.

With regard to the consolidated financial statements as of December 31, 2019, the FREP’s findings are as follows:

In the consolidated financial statements of K + S AG as of December 31, 2019, material assumptions, changes in assumptions, discretionary decisions and estimation uncertainties in connection with the impairment test of the cash-generating unit Potash and Magnesium Products (CGU Kali) were not adequately reported.

The net assets of the CGU Kali in the amount of EUR 5,428.3 million (51.3% of the consolidated balance sheet total) mainly consist of property, plant and equipment at the Bethune potash plant in Canada. In particular, it was not stated that for the first time not only the reported reserves, but also 40% resources were used for the determination of the value in use for this plant, which – unlike reserves – have not yet been sufficiently proven at the time of observation or are not yet economically recoverable. Furthermore, no reference was made to the extension of the duration of this work, which has more than doubled to around 150 years (perpetual annuity) as a result of the consideration of resources. Instead, the statement contained in the notes to the consolidated financial statements that the running times of the CGU are determined by the raw material reserves does not suggest that resources have been taken into account. The future expansion of the maximum production capacity in Bethune from 2.86 mt / a to 4.0 mt / a, assumed for the first time in the impairment test, was also not reported. In this way, the comparability required by IFRS financial statements in accordance with IAS 1.1 is not achieved.

There is a violation of IAS 1.122 and IAS 1.125, according to which the discretionary decisions associated with the accounting methods used as well as essential assumptions and estimation uncertainties are to be disclosed in the notes to the consolidated financial statements. In addition, IAS 1.31 in conjunction with IAS 36.132 also require that a company must consider additional information if the effects of events and conditions on the financial position would otherwise not be understandable for the users of the financial statements.

With regard to the abridged consolidated financial statements as of June 30, 2020, the FREP’s findings are as follows:

  1. For the interim financial statements of K + S AG as of June 30, 2020, no impairment test was carried out for the net book value of the cash-generating unit Potash and Magnesium Products (amounting to 5,196.8 million euros, 51.7% of the consolidated balance sheet total), although there were indications that the Net assets could be impaired. The indicators were in particular the negative development of the potash price and the further decline in market capitalization below the company’s net assets. Failure to test for impairment violates IAS 36.9 in conjunction with IAS 36.12 and IAS 34.28.
  2. In the interim management report of K + S AG for the first half of 2020, significant events and their effects on the financial position and development were not presented clearly enough. In particular, it does not express the fact that the free cash flow of EUR 166.2 million achieved in the first half of 2020 is fully due to non-operational measures, mainly to the factoring introduced in 2020 as a working capital management measure. This violates Section 115 (4) WpHG in conjunction with DRS 16.40 ff. (E.g. DRS 16.41, internal events g)).

K + S has been asked by the FREP to notify by December 9, 2021 whether the company agrees to the error findings or not. If the agreement was approved, the procedure at the FREP would be terminated.

Contact:
Investor Relations:
Julia Bock, CFA
Phone: +49 561 9301-1009
[email protected]

11/25/2021 CET / CEST DGAP Distribution Services include regulatory reporting, corporate / financial news, and press releases.
Media archive at http://www.dgap.de

Reference-www.finanzen.at

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