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16.8m yuan variance in Zhongxin's FY2019 audited results due to unit's impairment

CATALIST-LISTED Zhongxin Fruit and Juice, which produces and sells fruit juice concentrate, on Tuesday said a 16.82 million yuan variance between its audited and unaudited financial statements for the year ended June 30, was due to additional allowance for impairment in a subsidiary, Xuzhou Zhongxin Fruit and Juice Company.

Following the firm's audited financial statements, "investment in subsidiaries" should have been 31.4 million yuan, as opposed to the 48.2 million yuan posted in its preliminary unaudited statements for FY2019. 

Accordingly, equity attributable to owners of the company, as well as net assets value (NAV), were also reduced to 66.1 million yuan, versus 82.9 million reported previously. This translated to a NAV per share of 6.26 fen, down 1.59 fen from the 7.85 fen shown in its unaudited results. 

The company's management noted that it has carried out a review of the recoverable amount of the investment in the subsidiary, taking into account its existing and future performance, as well as the carrying value of the subsidiary's net assets. 

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Zhongxin Fruit and Juice had taken the initial view that no additional allowance for impairment was required, as it expected that the fair value of the unit's net assets would be higher than the carrying amount of the company's investment in it. 

However, after consultation with external auditors, RT LLP, the company had assessed there were indicators of impairment in the unit due to the losses it incurred for FY2019; and that it had ceased production since FY2015.

The company had then reassessed that an additional allowance for impairment loss of about 16.82 million yuan is required, leading to the adjustment. "This is due to the fair value of the property, plant and equipment and the land use rights provided by the external valuer being lower than the initial expected amount," the company said. 

In a regulatory filing, Zhongxin Fruit and Juice added that the adjustment does not impact the group's consolidated financial statements as the annual losses of this unit for the past few years were already included in its consolidated income statement prior to the adjustment, and that the adjustment was made only on the company level. 

The counter last traded at 0.5 Singapore cent on Monday, down 61.5 per cent, or 0.8 cent.