Commodity giant Glencore Xstrata recorded a goodwill impairment charge of $7.7 billion for its mining operations during the reporting period ended June 30, 2013.
What is especially noteworthy about the charge is that the transaction giving rise to goodwill closed May 3, 2013, a scant seven weeks or so before the impairment charge was taken. Not exactly “Day 2” impairment, but close.
The charge, recognized under IFRS, was equal to the entire amount of goodwill allocated to the mining operations at acquisition. Observers attribute the loss primarily to adverse commodity price changes while the long-anticipated acquisition was closing.
The writedown is a good reminder that value can change quickly, and there is no “bright line” regarding how soon an asset may be subject to impairment.
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