martes, 30 de agosto de 2016

What is an impairment test?


An impairment test measures whether a balance sheet item is worth the amount stated on the balance sheet. The balance sheet amount should be reduced if the impairment test indicates a lower value.

Impairment testing can be applied for both commercial (audit) accounts and tax accounts. Different countries, accounting standards and tax jurisdictions may have different rules on what is to be tested, when and how. Many countries have adopted IFRS (international financial reporting standards). For this reason, most of the discussion in this article refers to that set of accounting standards.

IFRS defines “Carrying Amount” as the amount at which an asset is recognized after deducting any accumulated depreciation (amortization) and accumulated impairment losses thereon. In short, it is the balance sheet amount of an asset or liability. IFRS states that indefinite life assets (long-term non-depreciating assets such as goodwill and certain branding assets) must be tested for impairment annually and also when there is an indication that the asset might be impaired. Indications include both Internal Indicators and External Indicators.

The list of External and Internal Indicators is extensive, but “Internal Indicators” generally refer to items under control of management such as an underperforming business unit. “External Indicators” include items outside the control of management such as changes in the economic environment. A number of years ago, I had a client in the steel industry. At the time, Chinese steel manufacturers were selling certain steel products at very sharp prices. The Chinese companies owned the entire value chain from mining to distribution and shipping. Given the large volumes, transport was only a small portion of the costs. These companies could therefore compete almost anywhere in the world. This economic pressure, change in industry dynamics and lack of ability for this company to adapt quickly to these changes lead to sweeping impairments along product line levels.

Definite life assets (long-term depreciated assets) may also need to be tested for impairment when there is an internal or external indication that these assets might be worth less than their Carrying Amount. I was asked a number of years ago to look at the value of a client’s inland barges. Utilization was less than 50% on some barges, suggesting that cash flow on those barges was underperforming. The barges were recorded as long-term depreciated assets and the underperforming barges were impaired.

Liabilities can also be impaired. I have a client who recorded provisions relating to a conditional earn-out from a previous acquisition. The acquired entity has recently been underperforming and it appeared that the earn-out might not be realized. The earn-out provision was ultimately impaired.

Now that we know what impairment testing is, let’s discuss how to do it. IFRS requires Carrying Amount to be compared to what IFRS calls “Recoverable Amount”, which is the higher of “Value in Use” and “Fair Value less Costs of Disposal”. Value in Use is the value that can be realized by the company that owns the asset or liability being tested and can include synergies, which are special conditions that cannot be realized by a hypothetical purchaser of the asset/liability outside of the company. The asset/liability might deliver major savings to a company by keeping it out of commission or grouping it with other assets/liabilities. Another example could be the application of the asset/liability to a company’s patented technologies. Fair value less costs of disposal refers to the price that could be received for an asset/liability, less selling costs, if the asset/liability is sold to a hypothetical purchaser at the impairment test date.

Certain rules apply to different accounting standards and tax jurisdictions. Some situations require pre-tax value measurements. Particularly in the case of tax impairments, fair value might not be adjusted for selling costs. A rule common in many cases is that the asset/liability should be tested in its current condition, for example, a dry-goods cargo vessel should not be retrofitted to transport oil.

In the case where a company has multiple business units (or cash generating units), impairment testing is usually carried out at business unit level. Testing at this level is required by IFRS, but also provides for a more accurate test and is anyhow good practice.

Value in Use and Fair Value less Costs of Disposal are often based on an income approach, though market approach is also possible. Asset (cost) approach is uncommon. Some practitioners view market approach as more in line with fair value, claiming that it minimizes unobservable valuation inputs (an IFRS and US GAAP requirement). However, the market implies valuation assumptions that would otherwise be directly estimated. In any event, it is good valuation practice to apply multiple approaches and to be able to explain the different results.

Once Recoverable Amount has been established, it must be compared to the Carrying Amount. If it is less than Carrying Amount, the asset/liability should be impaired. With definite-life assets and liabilities, Carrying Amount is fairly straight forward. It is the amount recorded on the balance sheet. However, with goodwill it is more complicated.

Goodwill can be found on the balance sheet, however this number should not be compared to Recoverable Amount. Goodwill cannot be separated from a company and sold individually, and does not have value in isolation. The value of goodwill cannot be measured directly. For this reason, we base goodwill impairment tests on company or business unit value.

Recoverable Amount in a goodwill impairment test is based on either “Enterprise Value” or “Equity Value”. Enterprise Value refers to the value of a company’s (or a business unit’s) operations. Equity Value is the value of a company’s (or a business unit’s) common equity. When basing Recoverable Amount on Enterprise Value, the result should be compared to invested capital. When the valuation basis is Equity Value, the result should be compared to common shareholders equity. If Enterprise Value is less than invested capital, or Equity Value less than common shareholders equity, goodwill should be impaired by the amount of this difference. This is the case in IFRS. In the case of US GAAP, if undiscounted cash flows are less than Carrying Amount, a complete purchase price allocation exercise must be carried out to recalculate goodwill, which is more complicated and time consuming than IFRS.

Impairment test reporting should include a plain language summary of all approaches and assumptions applied. The reader of the report should be able to replicate all calculations based on the information in the report. Commercial impairment tests are often reviewed by a company’s auditors, who involve valuation specialists in reviewing the impairment tests. These specialists can be expensive and their time is often divided over many projects. Review times can be lengthy. If the reporting is clear, this will minimize time and expense of the audit review.

With impairment testing, the devil is in the details. Common mistakes includes the calculation of Carrying Amount, discount rates and terminal value approaches. Simple mathematical errors are also common. Checks should be built into the valuation model. If an income approach value far exceeds the market approach value, there must be a defendable explanation. Take the time to prepare comprehensive impairment testing documentation. This will reduce time and expense with your company’s auditors and will simplify future impairment tests.

For further questions on impairment testing, contact Andrew Pike of AN Valuation Services at +31 70 221 0058 or

viernes, 19 de agosto de 2016

Opinion sobre La Ley de Aprovechamiento racional de minerales no metalicos Venezuela.

Durante aproximadamente 7 años hemos estado apoyando a las empresas del sector para tratar de entender esta ley que se esta aplicando en el estado Aragua.

El 17 de Noviembre de 2010 se publica en Gaceta oficial del estado Aragua la Ley para el aprovechamiento racional de minerales no metálicos, y luego el 9 de Junio de 2011 en Gaceta oficial N°1827  se publica la Reforma parcial de la ley para el aprovechamiento racional de minerales no metálicos del estado Aragua.
La ley propone cobrar un impuesto por toda aquella actividad relacionada con la comercialización, conversión, transporte, tenencia y almacenamiento de minerales no metálicos en el estado Aragua. Entiéndase que dentro de los minerales no metálicos se encuentra: El Talco, El Yeso, Anhidrita, caolín, Serpentitas, Fosfatos, Barita, dolomita, Diatomita, Calcita, Mica, Grafito, Feldespato, Cuarzo, Mármoles, Filitas, pizarras y granitos.
La ley establece en su articulo 114 que el impuesto a pagar estará dado por:
El estado luego de expropiar las canteras de la mayoría de las empresas del sector conforma el 23 de mayo de 2013 la empresa Aramica ( Aragua minas y Canteras C.A. )  empresa que tiene como objetivo
 "Llevar adelante la organización, planificación, explotación y comercialización de los yacimientos minerales no metálicos existentes en el territorio aragüeño; mediante el desarrollo de las minas, canteras, y saques; cumpliendo con los parámetros de calidad aplicables en oportunidad, cantidad y costos competitivos, ofreciendo agregados a los mercados públicos y privados que brinden soluciones competitivas a las necesidades de infraestructura, y de la industria de la construcción regional y nacional"
Que esta sucediendo en el sector, la empresa minera Aramica ahora prácticamente la única que vende material de caliza en la zona ha incrementado de forma exponencial los precios, ocasionando que sea mas económico traer materias primas de otros estados para procesarlo, con todo y que las empresas deben cancelar altos costos por el transporte del material a sus plantas. 

La Ley de Aprovechamiento racional de minerales no metálicos, podia en un inicio haber ayudado al sector recaudando dinero para ser reinvertido en hacer eficiente la extracción y venta de la materia prima requerida por la Mayoría de las Pymes para procesarlo y generar productos, van 7 años y no se ven mejoras tangibles para el estado, sino todo lo contrario empresas Pymes que mudan sus operaciones a otros estados para poder seguir operando.

lunes, 8 de agosto de 2016

Valorar una Empresa y el riesgo en Venezuela.

La ventaja de hacer consultoría en valoración y consultoría en la compra y venta de empresas es que se conoce de manera real como se esta moviendo el mercado, lo que permite suministrar opiniones de valor mas certeras.
Hay una gran variedad de modelos usados para estimar el valor de una empresa, algunos pueden estimar el valor de una empresa en base a información contenida en el balance, otros en base a información en la cuenta de resultados, otros en base a modelos Mixtos (Goodwill), algunos emplean modelos de creación de valor, nosotros empleamos en la mayoría de nuestros análisis el descuento de flujos de fondos " Consideran a la empresa como un ente generador de flujos(de dinero) y por ello sus acciones y su deuda son valorables como otros activos financieros" Prof. Pablo Fernández.
El modelo de valoración basado en el descuento de flujos de fondo permite calcular el valor de la empresa como

En Venezuela por la elevada tasa de riesgo y lo impredecible del mercado estamos proyectando a 3 años cuando en países como en estados unidos proyectamos a 10 años y en la mayoría de los países de la región proyectamos a 5 años.
Ahora bien dentro del modelo basado en el descuento de flujos de fondo podemos emplear tres procedimientos para determinar el valor de la empresa. El primero es el correspondiente a el Flujo para los accionistas, donde la Tasa de descuento es la rentabilidad exigida a las acciones, el segundo es el Flujo para la deuda, donde la tasa de descuento es la rentabilidad exigida a la deuda y por ultimo el tercero es el flujo de fondos libre ( es el que empleamos ) , donde la tasa de descuento es igual al Wacc que es la rentabilidad exigida ponderada a la deuda y las acciones.

Ahora bien para determinar la Tasa de descuento se requiere conocer el riesgo país que se determina a partir de un conjunto de riesgos; el riesgo político , el riesgo del impago de la deuda del gobierno, el riesgo del mercado.

El riesgo político depende de factores como el grado de corrupción, el grado de violencia, la dependencia de la economía a un producto, la protección de los derechos a la propiedad, la madures de las instituciones publicas, la suavidad de las transacciones políticas. Este indicador puede obtenerse a través de algunas empresas que se encuentran en el mercado como  entre muchas que se encuentran en el mercado. Como se puede observar Venezuela se encuentra dentro de los países con mayor riego político. Mapas Publicado en Articulo " Musing on Markets" elaborado por el Prof. Aswalt Damodaran

El riesgo de incumplimiento de pago del país, puede determinarse con las calificaciones soberanas de los países de Moodys y Standard & Poors. Veamos a continuación el siguiente mapa.