Auditor issues disclaimer of opinion on TH Heavy’s FY17 financial reports

PETALING JAYA: Practice Note 17 (PN 17) company TH Heavy Engineering Bhd’s (THHE) independent auditor Messrs Deloitte PLT has expressed a disclaimer of opinion on its audited financial statements ended Dec 31, 2017.

As part of its regularisation plan, THHE proposed to novate the contract for the provision of engineering, procurement, construction, installation and commissioning and leasing for Layang floating, production, storage and offloading (FPSO) facilities awarded to it by JX Nippon Oil & Gas Exploration () Ltd to Yinson Energy Sdn Bhd.

Upon the proposed novation, the FPSO Layang vessel is subject to impairment review. The valuer’s report states an indicative range of fair market value less cost of disposal between US$18.0 million and US$23.0 million (RM73.1 million and RM93.4 million); and estimated scrap value between US$10.0 million and US$15.0 million (RM40.6 million and RM60.9 million).

However, the shortfall between the carrying value and the recoverable amount on the basis of fair value or scrap value was not recognised as impairment loss by THHE in view that the proposed novation has yet to be completed as at year-end.

“As such, we are unable to ascertain whether the carrying value of the FPSO Layang vessel included in the capital work-in-progress as at Dec 31, 2017 at RM745.65 million is fairly stated,” the auditor said.

It also highlighted that the ability of THHE to carry on as a going concern, among others, is dependent on the implementation of the key components of the proposed regularisation plan as well as the ability to achieve sustainable and viable operations with adequate cash flows generate from operating activities.

“In the event that these are not forthcoming, the group may be unable to realise the assets and discharge liabilities in the normal course of business.”

Therefore, the auditor said, THHE’s financial statements may require adjustment to restate the carrying amounts of the assets to their recoverable amounts and to provide further liabilities that may arise.

Source: The Sun Daily

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