March 20, 2023, Vancouver, British Columbia – Eastern Platinum Limited (“Eastplats” or the “Company”) announced that it has amended and restated its condensed interim consolidated financial statements (the “Amended and RestatedFinancial Statements”) for the three and nine months ended September 30, 2022 and the corresponding management’s discussion and analysis (“Amended and RestatedMD&A”).
The restatement is due to a change in Eastplats’ accounting policies and determination from management of when revenue should be recognized in accordance with International Financial Reporting Standards from its contract with Union Goal Offshore Solutions Limited (“Union Goal”) and its sales of chrome concentrate previously recognized in the third quarter of 2022. The transactions in question involved the monthly production of chrome concentrate at the Company’s Crocodile River Mine. Chrome concentrate revenue is recognized when control is transferred to the offtake party, Union Goal, in accordance with the executed updated Retreatment Project Agreements (the “2021 Updated Retreatment Project Agreements”), which were signed on March 10, 2021 and include the following:
The 2021 Revised and Restated Framework Agreement;
The 2021 Revised and Restated Offtake Agreement;
The 2021 Revised and Restated Eastplats Loan Agreement; and
The 2021 Revised and Restated Barplats Equipment and Chrome Plant Agreement.
Previously, and until approximately June 30, 2022, revenue recognition occurred when the chrome concentrate was produced by the chrome processing circuits and related technology equipment, based on the assumption that all chrome concentrate was continually shipped upon production, and that payment from Union Goal was considered probable. However, after re-assessing the probability of future payment by Union Goal, in the third quarter of 2022, Eastplats suspended shipments to Union Goal as a result of continuing non-payment by Union Goal and failure of Union Goal to reduce its significantly long outstanding account. Eastplats began to contract free market sales. As such, these contracts provided transfer of control and revenue recognition as defined by IFRS 15 – Revenue from Contracts with Customers, upon completion of the Company’s performance obligations which included delivery of the chrome concentrate off site. Management has concluded that the restatement of its financial results, financial position, and cash flows for the third quarter of 2022 will appropriately address the timing of revenue recognition, along with the related accounts receivable and inventory balances, for these transactions prospectively.
The restatement will reflect the changes in the accounting treatment of these transactions and will result in the reduction of revenues recognized in the third quarter of 2022 and an increase in inventory as at September 30, 2022. Stockpiles at the Crocodile River Mine are surveyed monthly by an independent contractor. Revenue deemed not to have met the re-assessed revenue recognition criteria also results in an adjustment to accounts receivable.
The following table presents the effects of the restatement on the individual line items within the Company’s unaudited Condensed Interim Consolidated Statement of Income (Loss), Condensed Interim Statement of Comprehensive Income (Loss) and Condensed Interim Consolidated Statement of Financial Position, expressed in thousands of U.S. dollars, except for per share amounts.
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