Review of financial reporting – Stolt-Nielsen Limited
Published: 26 March 2014
Last updated: 18 March 2019
Finanstilsynet has reviewed certain aspects of the 2012 consolidated financial statements of Stolt-Nielsen Limited ("SNI"). The review has focused on three business acquisitions and bargain purchase gains.
In 2012 SNI acquired a bulk-liquid storage terminal in the Netherlands (Moerdijk), a fuel and chemical storage terminal in the UK (Dagenham) and a turbot farm in Spain (Acuidoro). The cash consideration paid was USD 25.8 million for Moerdjik, USD 31.6 million for Dagenham and USD 27.5 million for Acuidoro (here stated in the group's presentation currency). Post completion, SNI identified values in excess of the purchase price for all three acquisitions, resulting in negative goodwill of in total USD 17.1 million.
According to the international financial reporting standards (IFRS), the consideration paid in an orderly transaction will as a starting point represent the fair value of the businesses acquired. An acquirer shall recognise and measure assets acquired and liabilities assumed at their acquisition-date fair values.
In the 2012 financial statements, SNI recognised gains on the three bargain purchases, resulting in one-time income of USD 17.1 million which was disclosed in the Consolidated Income Statement. Finanstilsynet reviewed the three transactions and, in an advance notification of decision, the company was asked to reassess the values of the fixed assets in the three business acquisitions.
Following the advance notification, SNI reassessed the three acquisitions and reversed income of USD 12.3 million which are the entire gains for Moerdijk and Acuidoro. In Finanstilsynet's opinion the accounting treatment of these two transactions in the 2012 financial statements is not in accordance with IFRS. With respect to Dagenham, SNI's reassessment of the transaction has not resulted in any material change to the gain. SNI further concludes that the total gain for this business acquisition is not material. Finanstilsynet notes the assessment of materiality.
SNI has in a letter to Finanstilsynet stated that the effect of the reversed USD 12.3 million will be presented in the comparative 2012 financial statement, reducing the 2012 operating income by the said amount.