One of Fonterra's biggest shareholders, Colin Armer, took his concerns about Fonterra's shock asset writedowns in the 2019 financial year and financial statements for 2015-19 to the regulator in September 2019.
New Zealand's biggest business in FY19 posted asset writedowns and accounting adjustments of $826million and a net loss of $605million.
Around $4billion — representing 5% of dairy farm equity in New Zealand — was wiped off the balance sheets of Fonterra's 10,000 farmer-owners in FY18 and FY19, shareholder watchdog the Fonterra Shareholders' Council calculated.
Mr Armer said at the time of his complaint that shareholders had been badly let down by the company's leaders, the council and auditor PwC.
He also asked the FMA to investigate Fonterra directors' calculations on executive performance pay and why they were not independently audited.
The FMA's decision not to take action on the writedowns is separate from Mr Armer's complaint about PwC's auditing. That matter is understood to be still under inquiry by the frontline regulator of auditors, NZICA, the chartered accountants’ organisation. The FMA engaged with NZICA over the complaint.
Mr Armer has been approached for comment.
The FMA in a statement said its inquiries followed complaints about the timing of the accounting writedowns relating to Beingmate Baby and Child Food Co Ltd (Beingmate) and China Farm assets (China Farms). The values of these, and other, assets were re-stated in a Fonterra market announcement in August 2019.
Before these inquiries, the FMA said it had also reviewed the valuation of Beingmate in Fonterra's 2017 financial statements and China Farms in its 2018 financial statements.
"In the context of these various inquiries, the FMA has spent considerable time seeking to assess the reasonableness and supportability of forecasts used, and assumptions applied, in valuing parts of Fonterra's business and related disclosures," the authority said.
"From September 2017 to April 2018, the FMA engaged with Fonterra on its valuation of Beingmate for the year ended 31 July, 2017. The engagement focused primarily on the base share price and the premium applied in the valuation of this investment.
"Fonterra wrote down the Beingmate investment by $405million in its half year financial statements for the period ended 31 January 2018, and enhanced its disclosures relating to the key inputs and assumptions, including the sensitivity of the value of the investment to changes in key assumptions."
The FMA said it engaged with Fonterra regarding its valuation of China Farms before the release of Fonterra's 2018 financial statements. It reviewed the calculations and assumptions used by Fonterra management in the valuation of these assets.
During this engagement, Fonterra enhanced its relevant disclosures on key assumptions, and sensitivities to changes in key assumptions, applied in the valuation of China Farms. — The New Zealand Herald
