PwC expresses "reservations" on the consolidated accounts disclosed on Wednesday by Associação Mutualista Montepio Geral (AMMG).
The audit firm PwC expresses “reservations” on the consolidated accounts disclosed on Wednesday by Associação Mutualista Montepio Geral (AMMG), considering that the deferred tax assets, equity and net profit are “overstated by a materially relevant amount”.
“In our opinion, the deferred tax assets, shareholders’ equity and consolidated net profit for the year attributable to the Group, included in the Group’s consolidated balance sheet and consolidated income statement as at December 31, 2020, and December 31 2019, are overstated by a materially relevant amount, the magnitude of which we are unable to quantify, given the uncertainty inherent in the projections of Montepio Geral’s taxable results,” PWC said.
According to the report on the audit of the financial statements, attached to the 2020 annual report and accounts, “based on the projections presented by the Board of Directors and the conditions provided for” in the IAS12 international accounting standard, “Montepio Geral does not demonstrate the capacity to generate sufficient taxable income to allow the recovery of a substantial part of the deferred tax assets recorded in its individual financial statements”.
The 2020 balance sheet of Montepio includes assets of €1.376 billion and €1.296 billion, at December 31, 2020 and December 31, 2019, respectively, relating to deferred tax assets, of which €867.6 million and €822.3 million, respectively, come from the (individual) balance sheet of Montepio Geral.
According to PwC, “the deferred tax assets from the balance sheet are originated, essentially, by deductible temporary differences regarding the constitution of technical provisions, whose taxable base amounts to €3,206,112,000 on December 31, 2020”.
However, “in accordance with international accounting standard IAS 12, Income Taxes, the recovery of deferred tax assets must be evaluated according to the achievement of taxable results, which should be projected excluding the taxable components originated by new deductible temporary differences”.
PwC had already raised these “reservations” regarding the individual accounts of the mutualist, maintaining its position in a divergence that goes back to last year and which led to the creation, with a view to its resolution, of a working group that included external specialists, leaders of Montepio itself and the former auditor KPMG.
Excluding these “reservations”, PwC considers that the consolidated financial statements of Montepio Geral – Mutualist Association (MGAM) “present in a true and fairway […] the consolidated financial position” of the group on December 31, 2020 “and its consolidated financial performance and cash flows for the year ended on that date”.
In 2020, Montepio Geral had a consolidated loss of €86 million, after a profit of €9 million in 2019, penalised by losses of €81 million from Banco Montepio, it was disclosed today.
“In 2020, MGAM’s consolidated net result was negative, at -€86 million, a much higher figure than the -€18 million recorded on an individual basis,” reads the 2020 Consolidated Report and Accounts, made available today on the mutualist’s ‘website’ and which will be voted on at an Extraordinary General Meeting on the 30th.
According to the message from the mutualist’s chairman, Virgílio Lima, this was due, “above all, to the effects of the pandemic on Banco Montepio’s consolidated results, which reached -81 million euros by way of the extraordinary amounts of credit impairments set up, among other adverse effects.”