The accounting treatment of Murray Goulburn's milk supplier support program (MSSP) last financial year is being questioned by a forensic accountant.
According to accounting firm Morris Forensic, Murray Goulburn's classification of the advance to farmers made under the MSSP as an "asset" is incorrect because it has no right to recover the advance from farmers, Fairfax Media reports.
The dairy cooperative could have overstated its earnings to the tune of around $150 million last financial year, and instead of reporting a pretax profit of $57.5 million, would have instead made a hefty loss of $92.5 million, Morris Forensic says.
Murray Goulburn has since opted to write off part of the advance.
Murray Goulburn also this week appeared before the Senate Economics References Committee in Melbourne as part of an inquiry into dairy industry milk contracts. The company said it had acknowledged the significant impact of April’s milk price reduction on its suppliers and committed to transparency in milk pricing moving forward.
Murray Goulburn's chairman, Philip Tracy, told the committee that Murray Goulburn welcomed the opportunity to discuss the challenges and opportunities facing the Australian dairy industry.
“As Australia’s largest dairy food company and a co-operative that is 100 per cent farmer controlled, we recognise the significant responsibility and position we hold in the Australian dairy industry. In FY16, approximately 96.5 percent of the milk pool was paid to suppliers in milk payments and supplier-shareholders received approximately two-thirds of dividends paid.”
Tracy said MG chose what it believed was a fair option but that the MSSP hadn’t met expectations and changes were announced last month.
“At the commencement of FY17, with the combination of continuing weak market conditions and feedback from our suppliers, it became clear that the MSSP was not operating as it was originally intended. Following an internal review and receiving an opinion from independent expert, Grant Samuel, we have now adjusted the MSSP arrangements. There will be no further recoupment of the MSSP during FY17 and we have extended the recoupment period to halve the annual impact on suppliers.”
