Why did LTAT omit impairments for Boustead Holdings and Pharmaniaga investments?

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LTAT Did Not Disclose Reasons for Omitting Impairments on Boustead Holdings and Pharmaniaga Investments

The Armed Forces Fund Board (LTAT) has not provided specific reasons for omitting impairments on its investments in Boustead Holdings and Pharmaniaga. Reports indicated that this omission led to an overstatement of LTAT's net profit and subsidiary investments by RM0.812 billion. Furthermore, the fund reportedly recorded a non-cash profit of RM189 million, which was used as the basis for its 2022 dividend payment.
Overstated Net Profit and Investments

The omission of impairments for investments in Boustead Holdings and Pharmaniaga resulted in a reported overstatement of LTAT's net profit and subsidiary investments by RM0.812 billion. This accounting treatment means that the fund's reported financial performance and asset values were higher than they would have been if the impairments had been recognised.
Non-Cash Profit Basis for Dividends

LTAT recorded a non-cash profit of RM189 million, which was subsequently used as the foundation for distributing dividends in 2022. While the fund stated that excluding this non-cash profit would still maintain a solvency position above the threshold required by its dividend policy, the reliance on such profits for dividend distribution has been highlighted. LTAT has also clarified that its declared dividends are non-cash in nature and are credited directly to members' accounts, asserting that this does not affect the fund's liquidity.
Auditor-General's Report Findings

The Auditor-General's 2022 report on federal agencies flagged that LTAT's reserves had been in deficit since 2020, standing at a negative RM376 million in 2020, RM258 million in 2021, and RM338 million in 2022. The report also noted 41 old stock portfolios with an unrealised loss of RM662 million as of December 31, 2022, which contributed to this deficit. In response, LTAT stated that the negative Other Comprehensive Income (OCI) Reserve highlighted in the report is only one component of its combined reserve and does not reflect its overall financial stability.

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Why did LTAT omit impairments for Boustead Holdings and Pharmaniaga investments?

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