media release (16-280MR)

Energy Resources Australia writes down the carrying value of non-current assets

Published

ASIC notes the decision by Energy Resources of Australia Limited (ERA) to make a $161 million impairment charge to non-current assets for the Ranger mine in its financial report for the half-year ended 30 June 2016 (30 June 2016 report).

ASIC reviewed ERA's 31 December 2015 financial report as part of its ongoing financial reporting surveillance program and questioned the use of a single discount rate to the different components of the forecast cash flows in testing assets and liabilities for the Ranger mine for impairment.

ERA maintains that its 31 December 2015 financial report complies in all respects with the Corporations Act and Australian accounting standards.  ERA has stated in its 30 June 2016 report that continued decline in the uranium oxide spot price was an indication of impairment at 30 June 2016. Impairment testing on the Ranger cash generating unit showed that the carrying amounts exceeded fair value. ERA also stated that external and business-specific factors in the six months to 30 June 2016 warranted a review of, and revision to the valuation technique used to determine fair value. Due to sustained weakness in the uranium market and the remaining life of current operations now being less than 5 years (in the absence of an Authority extension), ERA considers that the probability of a market participant utilising a more sophisticated valuation method is increasing.  Consequently, ERA has determined different discount rates for current operations, rehabilitation cash flows and the Ranger 3 Deeps development option.

As outlined in ASIC media release 15-331 MR Focus areas for 31 December 2015 financial reports, impairment testing and asset values remain a focus area of our financial reporting surveillances. 

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