Impairment of investment

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Yiota
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Joined: 15 Dec 2022, 15:03

Impairment of investment

Post by Yiota »

Hi,
The company in their books has an investment in a subsidiary as at 31/12/2021. However, in 2022 Management made a decision to discontinue projects running within the subsidiary.
Does the company have to impair the value of the investment as at 31/12/2021?

Thank you.
JRSB
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Re: Impairment of investment

Post by JRSB »

no if there was genuinely no decision made. but if that decision later leads to an impairment, maybe there were other reasons for impairment anyway at that date, ie if the business wasn't performing well or generating profits/dividends etc. if it was doing really well, would they decide to close it? so i dont know if the decision to discontinue project is necessarily the driver of impairment?
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Marek Muc
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Re: Impairment of investment

Post by Marek Muc »

what happened in 2022? impairment is future oriented (future cash flows etc) and it's rather unlikely that the investment wasn't impaired at 31/12/2021
Yiota
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Re: Impairment of investment

Post by Yiota »

They are in the procedure to liquidate the subsidiary and there will be no transfer of funds back to the parent company, so I suppose we have to impair the value of the investment in 2021?
JRSB
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Re: Impairment of investment

Post by JRSB »

if it was in liquidation at dec 2021 and you knew at that point there would be no return of capital/value then yes impair fully!
Yiota
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Re: Impairment of investment

Post by Yiota »

At the balance sheet date (2021) there was no Management decision to close the Company.
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Marek Muc
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Re: Impairment of investment

Post by Marek Muc »

what happened in the business environment of that company in 2022?
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