Hi, I have a question not out of the CFA textbooks. But this should be around level 1 standard.
These are the financial statements for bumitama agri, a palm oil producing company. Naturally, it owns land use rights. It is a relatively young company, so its land use rights still have a relatively long remaining tenure.
My question here is why the amortisation for the next 5 years is so low. If you calculate it, you would obtain a figure of around 4509IDR million amortisation per year, even though net carrying amount at start 2015 was 486160IDR million. This would work out to be a roughly 0.92% amortisation rate per year. It is stated that land use rights are amortised on straight line basis over 25-35 years. Even if you take the upper range of 35, I would think that there would be a minimum of 1/35=2.9% amortised per year. (straight line depreciation).
Does anyone have any guesses as to why the amortisation calculated is so low?
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