1MDB would have showed a much larger loss than its RM669m loss before tax if it hadn’t included in its books a surplus on revaluation of investment properties amounting to RM897m.
In the previous year (year ended 31 March 2013), 1MDB included a revaluation surplus of RM2.7bn in its accounts. If it had not done this, it would have incurred a loss of close to RM2.0bn instead of a profit before tax of RM0.9bn.
Other points to note:
- 1MDB’s finance/interest costs of borrowings has soared to RM2.4bn from RM1.6bn a year earlier.
- Similarly, its “general and administrative” expenses rose to RM1.4bn from RM0.9bn the previous year. That’s about 40 per cent more than the Penang state government’s 2015 budget of RM1.0bn! What accounts for this sharp rise in administrative expenses?
- The RM1.2bn “impairment loss on goodwill” in the previous year is actually part of the so-called “goodwill” of RM2.6bn derived from 1MDB’s acquisition of power assets that had to be partly written off. This RM2.6bn “goodwill” is from the purchase of power assets from Ananda Krishnan’s Tanjung Energy (Powertek Energy) (RM1.8bn) and Genting Sanyen (RM0.8bn). An accounting term, goodwill represents the difference between the amount paid for the assets and the fair (actual) value of those assets. In that sense, some believe that 1MDB overpaid for these assets (bearing in mind the concession agreements were expiring). That might explain why RM1.2bn of the so-called “goodwill” had to be promptly written off.