- 2009.10 BENEFUN INT’L
Company Name: Benefun International Holdings LimitedStock Code: 1130Year end: June 30, 2009
Basis for qualified opinion
In last year, we were unable to obtain any evidence to substantiate certain alleged purchase transactions of approximately HK$30.63 million and had qualified our opinion accordingly. Details of the qualification were more fully explained in 2008 audit report. Any adjustments found to be necessary in respect of these transactions would have a consequential effect on the Group’s retained earnings at the beginning of the year, results of the current year and net assets at 30 June 2009.
Included in the consolidated income statement for the year ended 30 June 2009, turnover of approximately HK$43.12 million and cost of sales of approximately HK$30.85 million in relation to the sale and purchase of organic fertilisers (the “Transactions”), were recorded in the last three months of the year. At 30 June 2009, the trade receivables and other receivables of approximately HK$17.36 million and HK$1.27 million respectively were in related to the Transactions. The production processes and operation of this new business were mainly handled by an external sub-contractor, who performed the production process and also collected sales proceeds directly from ultimate customers on the Group’s behalf. However, there was no system of internal control maintained by either the sub-contractor or the Group over the Transactions that we could rely for the purpose of our audit. We have been unable either to obtain adequate reliable information, or to carry out alternative audit procedures to satisfy ourselves that the Transactions, the related taxes, trade receivables and other receivables were properly recorded. Any adjustments found to be necessary in relation to the Transactions would have a consequential effect on the Group’s results and cash flows for the year and net assets at 30 June 2009.
Qualified opinion arising from limitation of audit scope
In our opinion, except for the possible effects of matters described in the basis for qualified opinion paragraph, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 30 June 2009, and of the Group’s profit and cash flows for the year then ended in accordance Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of Hong Kong Companies Ordinance.
- 2009.10 PROVIEW INT’L
Company Name: Proview International Holdings LimitedStock Code: 334Year end: June 30, 2009
Basis for disclaimer of opinion
(a) Impairment of property, plant and equipment
Included in the property, plant and equipment as at 30 June 2009 were leasehold improvements, moulds and machinery, furniture, equipment and motor vehicles, and construction in progress with an aggregate carrying amount of HK$550,141,000. As set out in the consolidated income statement, the Group incurred a gross loss and a loss of HK$1,609,782,000 and HK$2,917,126,000, respectively, for the year ended 30 June 2009 and together with the fact that production activities of certain of the Group’s facilities were suspended during the year, in our opinion this constituted an indicator of impairment. However, no impairment loss was recognised for the year ended 30 June 2009. We were unable to satisfy ourselves as to the appropriateness of the assumptions made by the Directors of the Company in the preparation of their value-in-use calculation and accordingly, we were unable to assess whether the recoverable amounts of leasehold improvements, moulds and machinery, furniture, equipment and motor vehicles, and construction in progress exceeded their carrying amounts as at 30 June 2009 and whether any impairment loss should be recognised in accordance with Hong Kong Accounting Standard 36 “Impairment of Assets”. Any adjustments found to be necessary would affect the Group’s net liabilities as at 30 June 2009 and the Group’s loss for the year then ended.
(b) Going concern
As set out in the consolidated financial statements, the revenue of the Group significantly declined and the Group incurred a loss of HK$2,917,126,000 for the year ended 30 June 2009 and, as of that date, the Group’s net current liabilities and net liabilities amounted to HK$2,323,936,000 and HK$1,482,259,000, respectively. In addition, the Group defaulted on repayments of certain bank borrowings and related interest during the year. Accordingly, certain of the Group’s major operating subsidiaries have entered into an agreement with the banks (the “Framework Agreement”) to restructure these borrowings. The Framework Agreement allows the banks to appoint representatives to the management of the subsidiaries and monitor the subsidiaries’ cash position and approve the use of the subsidiaries’ cash. Under the Framework Agreement, the banks will not grant new loans to or demand repayment of the existing borrowings from the Group.
As set out in the consolidated financial statements, during the year, certain of the Group’s major operating subsidiaries also defaulted on repayments to their creditors and suppliers. Accordingly, these subsidiaries have been named as defendants in several court actions in the People’s Republic of China, with amounts unpaid of HK$436,425,000 together with interest of HK$2,609,000 thereon as at 30 June 2009. The Group is currently negotiating with these suppliers and creditors to reschedule these payments.
The Directors of the Company have been taking steps to improve the liquidity of the Group. These steps included (i) entering into agreement with bankers to reschedule the repayments of bank borrowings under the Framework Agreement referred to above; (ii) reducing manpower and production costs and discontinuing some non-core and unprofitable businesses; (iii) negotiating with the Group’s suppliers to reschedule the payments of the Group’s expenditures as described above; and (iv) exploring new business opportunities.
These matters therefore indicate the existence of material uncertainties which cast significant doubt about the Group’s ability to continue as a going concern.
The validity of the going concern assumption on which the consolidated financial statements are prepared is dependent on the favourable outcomes of the steps being taken by the Directors of the Company as described above. The consolidated financial statements have been prepared on the assumption that the Group will continue as a going concern and therefore do not include any adjustments relating to the realisation and classification of non-current assets that may be necessary if the Group is unable to continue as a going concern.
Should the going concern assumption be inappropriate, adjustments may have to be made to reflect the situation that assets may need to be realised at other than the amounts at which they are currently recorded in the consolidated balance sheet. In addition, the Group may have to provide for further liabilities that might arise, and to reclassify non-current assets as current assets.
Disclaimer of opinion
Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of affairs of the Group as at 30 June 2009 and of the loss and cash flows of the Group for the year then ended in accordance with Hong Kong Financial Reporting Standards and as to whether the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.