Measuring Impairment at Dofasco Harvard Case Solution & Analysis

In the month of December 2008, the ArcelorMittal Dofasco (Dofasco) accounting team was confronting an essential challenge. In recent years, Dofasco had undergone major ownership changes, and when the business had first been acquired, the market had put a premium share value on the Dofasco subsidiary company. In light of a recent economic slowdown, the bookkeeping team was needed to reassess the values assigned to the subsidiary's net assets. Dismal predicted earnings for the businesses signaled a potential damage of the operation's assets under international financial reporting standards (IFRS).

The team began with a review of the first fair value estimates, following purchase price and its allotment to various tangible and intangible assets and obligations. It was discovered the evaluator's honest value appraisals for the various intangibles had relied on an income approach, using projected EBITDA derived from each intangible to determine its worth. The team wondered how the revised EBITDA projections would alter the recoverable value of the intangible assets of Dofasco and hence discover the consequences of the present economic scenario on the value of intangible assets recognized at the acquisition of Dofasco.

PUBLICATION DATE: January 11, 2010 PRODUCT #: 909B17-HCB-ENG

This is just an excerpt. This case is about FINANCE & ACCOUNTING

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