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Managing impairment

Current market conditions mean that asset values are likely to be under scrutiny by ASIC and the market in the current reporting season.

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Depending on individual circumstances, issues that CFOs, Audit Committees and Directors may need to consider include:

  • Have any acquisitions in the past few years resulted in significant goodwill and intangible assets on the balance sheet?
  • Are there intangible assets (e.g. patents, licences, brands, customer assets and goodwill) or other assets where future cash flows may not support the carrying value?
  • Have regional economic growth rates and other parameters been applied to each CGU?
  • Have different growth rates been applied across different cash flow items?
  • Does the current analysis consider the impact of varying key assumptions?
  • What is the appropriate discount rate for each CGU?
  • Does your current impairment model comply with the requirements of the accounting standards?
  • Has the inter-relationship between (changes in) cash flows and (changes in) discount rates been fully reflected in the current impairment model?
  • Will an impairment charge have any implications for tax, such as the thin capitalisation rules, banking covenants or the ability to pay distributions?

How Deloitte can help

Deloitte’s specialists can help your organisation with your impairment assessments by:

  • Measuring your potential impairment and provide you with a reasoned and robust framework to support the carrying value of goodwill, intangible assets and other assets in the context of rapidly changing economic and business conditions
  • Understanding the specific requirements of the accounting standards
  • Determining an asset’s fair value and its value in use
  • Determining an appropriate multiple and discount rate
  • Formulating appropriate crosschecks
  • Dealing with the issues and questions that may be raised by auditors or regulators
  • Providing you with access to specialist modelling, tax, technical accounting and economics teams to assist in the preparation of an impairment model.

Contact us to find out more.

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