Impairment Testing for a leading Automotive Manufacturer
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Impairment Testing for a leading Automotive Manufacturer
A leading automotive manufacturer operating through a joint venture between international automotive groups with an investment in plant that exceeded USD 1 billion
The business situation
- Following revisions to the joint venture agreement and delays in product launch timelines, the client needed to assess potential impairment of its manufacturing facility and related assets
- The client engaged our team to perform impairment testing under IAS 36 – Impairment of Non-Financial Assets, including determination of recoverable value and quantification of any impairment impact for financial reporting purposes
Our team’s role
Assessment of Operating Structure and Cash Generating Unit
Developed a detailed understanding of the operating structure and revised the structure following the JV agreement amendments. The Estimated Value-In-Use (VIU) of the overall company as the Cash Generating Unit
Estimation of Fair Value of Assets
Estimated fair/realizable value of land, plant, machinery, tools, and buildings. Considered asset condition, usage, and revised operational outlook
Determination of Recoverable Amount and Impairment
Determined recoverable amount of the CGU to conclude on the quantum of impairment, if any. Estimated VIU based on cash flow projections of planned and agreed new launches
Audit Coordination and Stakeholder Alignment
Conducted detailed discussions with auditors, client, and advisors on valuation approach and assumptions. Ensured alignment and audit acceptance of impairment analysis
The value our team added
- Independent and defensible impairment assessment: Delivered a structured impairment analysis aligned with accounting standards and reporting expectations
- Improved decision visibility for management: Enabled management and auditors to clearly understand impairment exposure and financial reporting implications
- Efficient audit execution: Supported timely audit review and acceptance of impairment conclusions through robust documentation and stakeholder coordination
Case study references work performed by the Uniqus leadership/team members at their existing/respective previous organizations
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