OREANDA-NEWS. Disclosure of Qatari German Company for Medical Devices about external auditor qualification on the financial statements for year 2014.

Qualified Opinion:

As disclosed in Note ''''8'''' to the financial statements, the company has recognized a plot of land obtained under operating lease in 2001 as property, plant and equipment. In year 2007, the company reclassified a parcel of land as investment property from its property, plant and equipment based on its purpose. The management is of the view that the risk and rewards of the leased land will be transferred to the company at the end of lease period based on subsequent discussions with the Ministry of Municipality and Urban Planning and have also sent a request letter to the Ministry to confirm the same. As of the date of disclosure, we have not been provided any confirmation from the Ministry of Municipality and Urban Planning confirming that such land will be transferred to the company or renew the lease of long term agreement for similar period.

Due to the recording of the leased land as property, plant and equipment and investment properties, the following are the financial impact of these transactions:

1-      Using the revaluation model, the company has recorded the leased land at its fair value in year 2007 in property, plant and equipment. As on 31 December 2014, the property, plant and equipment is overstated by the value of leased land amounted to (23,507,810 QAR) with a corresponding revaluation reserve in the equity. However, since 2007, the company stopped revaluing the land at fair value. The management decided that the revaluation will continue after getting the final approval on the transfer of ownership of the leased land.

2-      In year 2011, the company reclassified a parcel of land lease as investment property using the fair value model. As of 31 December 2014, the investment property is overstated by value of leased land as investment Property amounting (26,311,600 QAR).

3-      Due to recording of the leased land as investment property using fair value model, the company recorded fair value gains since 2011. The effect of such transactions caused an understatement of the accumulated losses and net losses for the year ended 31 December 2014 amounted to (21,845,277) QAR and (1,973,370) QAR respectively.

Consequently for the sake of transparency in disclosing information for our shareholders and public, we are disclosing our communication with the related authorities in the state in order to do the needful to remove the qualification through one of following methods:

-          Transfer the ownership of the leased land or renew the lease contract for a long term contract.

-          Reducing the company debt with the possibility to transfer it into the company''''s capital.

And once we get the result of above procedures, we will disclose the results no later than 30 / 3 / 2016 (during disclosure period on annual financial statements for year 2015).

And if the company couldn’t get the required approval for above requests, then the value of the land will be removed from property, plant and equipment, and according to external auditor report it will result in increasing the company’s accumulated losses by 21,845,277 QAR according to financial statements as of in 31 December 2014.