Financial Supervisory Authority of Norway orders Observe Medical to correct 2023 IFRS misstatements including a NOK 67 million Biim goodwill write-down

The Financial Supervisory Authority of Norway has issued a supervisory report and final decision following its review of Observe Medical ASA’s 2023 annual financial statements and selected aspects of its first-half 2024 interim financial statements, concluding that the issuer’s financial reporting contains material and pervasive errors. The decision orders Observe Medical to correct specified misstatements in its next financial reporting in line with IAS 8. Key findings relate to accounting for the 2023 Convatec transaction and impairment testing and disclosures for goodwill and other intangible assets. On the Convatec transaction, Finanstilsynet found material errors under IAS 38 and IFRS 9, including incorrect recognition and measurement of startup costs (around NOK 4.5 million) and shortcomings in allocating the purchase price across identifiable intangible assets. While Observe Medical had corrected some matters in later interim reporting, the decision requires additional corrections, including allocating part of the consideration to the separate, free-of-charge licence agreement and to customer and distributor lists. On impairment, Finanstilsynet concluded the company did not perform the required IAS 36 testing for 2023 and that a compliant test would have led to a material impairment, including a full write-down of all goodwill related to the Biim cash-generating unit of about NOK 67 million in the 2023 financial statements. The review also identified several material disclosure deficiencies in the annual and interim reports. Observe Medical has informed Finanstilsynet that it will comply and implement the required corrections in its 2024 annual report. Finanstilsynet also requested a specific post-publication confirmation of where and how the corrections have been made, and noted that the decision can be appealed within three weeks of receipt.