Intermediate Accounting Report - Depreciation Analysis on Knm Group

ACCT203 Group Report

Depreciation, Impairment and Depletion

Suspicions of KNM Group Berhad on Depreciation Methods

Group 17

OR Hong Nam

FU Ka Chun

LIU Zhe

LOU Yukun

TSUI Joshua

ZU Jichao

EXECUTIVE SUMMARY

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his report mainly discusses an incident happened in 2008, when suspicions arouse on KNM Group Berhad’s financial statements of 2008, where investors discovered some ambiguous items and problems underlying its depreciation methods.

Firstly, we will provide basic introduction of KNM, which is a Malaysia based company listed on Bursa Malaysia Securities Berhad.

Secondly, we will focus on the problems we found within the financial statements, especially on those concerning KNM’s depreciation problems.

Then, a comprehensive analysis will be provided with three different approaches to examine the depreciation methods adopted by KNM Group in its recent financial statements. We will apply the IFRS accounting concept of depreciation to the deliberation.

Finally, we will share some similar examples other than KNM to illustrate this common manipulation in accounting process, trying to figure out the motivations of this incident.

KNM Group Introduction

KNM is a company with global brand. It is a well-diversified group of companies with its business in process plants, modules and O&M (Operation and Maintenance) equipment, process technologies and engineering, plant services and turnkey systems provider for the oil, gas, petrochemicals, minerals processing, desalination, renewable energy, chemicals, steam generation, power and environment industries

The KNM Group's major customers are the international oil, gas, petrochemicals, energy and minerals processing companies and global engineering contractors. Most of its revenues are realized from the export markets:

Additionally, as we are doing research mainly on the year of 2008, so here we investigate the major events of the company in 2008:

Firm acquisition -- Borsig GmbH, Germany...