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financiAL STATEMENTs
Annual Report 2017
85
Key Audit Matters (Cont’d.)
Impairment of property, plant and equipment and biological assets
(Refer to Note 12, Note 14 and Note 37 (i))
On 23 August 2016, the Company’s subsidiary, PT Nunukan Jaya Lestari (“PTNJL”), received an order issued by the Menteri Agraria
dan Tata Ruang/Kepala Badan Pertanahan Nasional (“Ministerial Order”) dated 25 July 2016 to revoke PTNJL’s right for the cultivation
of oil palm in Kalimantan Utara with immediate effect.
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 to 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. 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.
Independent auditors’ report
to the members of Fima Corporation Berhad