Could the simultaneous shift in macroeconomic factors cause a flood of impairments?
Is your organisation subject to impairment testing?
A series of bad economic news may mean that your company needs to consider the value of assets on the balance sheet and the requirements of AASB136 Impairment of Assets.
Consider these factors:
- Increases in interest rates directly increasing the cost of borrowings by at least 3%
- Short-term inflation of 7-8% and mid-term inflation above RBA’s target
- Supply chain challenges (whether caused by disruptions in overseas suppliers, domestic weather events or a myriad of other issues) causing a slow-down in production
- Dramatic increases in short-term energy costs
- Consumer demand easing
- Overseas customers facing recession
- The possibility of a domestic recession
- Lenders deeply concerned about credit quality
- Equity markets abandoning high-risk and high-growth businesses
- Many Australian businesses being price-takers (particularly in the hard commodity sector)
Together, these macroeconomic forces may well see short-term cashflows materially impacted.
If that doesn’t cause auditors to pause to consider the quality of impairment testing, then nothing will!
If you would like to discuss an immediate solution to your concerns, email Michael Churchill mchurchill@peloton.group or call 0412 066 019. Peloton’s rapid response impairment diagnostic sheds light through the darkening economic clouds.