ARM to call in external forensics if bean counters can’t crack long-standing R230m accounting puzzle

THERE’S serious head-scratching underway in the finance division of African Rainbow Minerals, the Johannesburg-listed diversified miner.

The company is in the final throes of an internal forensic investigation into why a receivable item of a not negligible R230m can’t be accounted for. Apparently, the matter has been on the company’s books for seven years.

The firm’s auditor placed a qualification on a line item in long-term receivables that, if not solved internally over the next two to three weeks, will require external forensic investigators to take over.

ARM told analysts it would be “very surprised” if the matter amounted to fraud, but that can’t currently be discounted. Most likely, it relates to the inter-dependent and somewhat complicated web of loans between it and Glencore, its joint venture partner in the coal division.

The R230m represented 0.72% of group non-current assets and 0.54% of group total assets as of June 30, 2020, ARM said.

The worst likely outcome is that ARM has made an overstatement of its receivables, said ARM CFO, Abigail Makhuba. But it’s a tad confounding the matter has only really seen light of day now considering the anomaly has been part of the company since 2013.

On the issue of disclosure, one analyst also said he was surprised ARM had not announced its short-lived buy-back programme which was undertaken in March.

“That’s normally the procedure,” he said. “A company will announce a buy-back.” As it happened, ARM abandoned the buy-back after only five days buying a mere R57m worth of shares before the Covid-19 lockdown struck, making the wisdom of calling the share price somewhat questionable.

It was a good call, actually.

Shares in ARM raced to a five-year high between March and now giving support to Motsepe’s hope the firm would re-enter the JSE’s Top 40 Index.

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