KPMG raises “going concern” issue about Asia Environment Holdings

The company recorded a deficit in net current assets of RMB573mln and RMB159mln, respectively, as of 31 December 2010.

The auditing firm noted that Asia Environment Holdings’ financial statements were prepared on a going concern basis despite the losses recorded.

KPMG said the engineering and consultancy company qualified its position based on the assumptions that it will be able to obtain a waiver from its creditor-bank on the breach of its loan covenants and issue new shares to raise cash proceeds.

Asia Environment Holdings admitted its financial health also depends on its ability to secure new loan for the construction of its office building and factories, and obtaining support from its lenders, shareholders and its suppliers “to extend the repayment terms of outstanding revolving loans and trade payables which have been classified within current liabilities.”

KPMG said the uncertainty surrounding the company’s options may cast “significant doubt” on its ability to continue doing business.

“[The] conditions, along with other matters... indicate the existence of a material uncertainty which may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern, and therefore, the Group and the Company may be unable to realise their assets and discharge their liabilities in the normal course of business,” the auditing firm said.

KPMG said changes may have to be made in the position stated in Asia Environmental Holdings’ financial documents should the going concern assumption be inappropriate.

“The company may have to provide for further liabilities which might arise, and to reclassify non-current assets and non-current liabilities as current assets and current liabilities, respectively,” KPMG said.