The Tata Steel Group has said that it took an impairment charge of Rs 8,356 crore in Q4 FY’13.
“A significant portion of this impairment charge relates partly to the goodwill created on the acquisition of Corus Group plc in 2007, and partly to the assets of the business units that have been adversely affected by the severe contraction in demand, especially in the construction sector. The balance impairment relates to the assets in Tata Steel KZN in South Africa, Tata Steel Thailand and Tata Metaliks for Redi Plant”, n a press release, it said.
According to accounting experts, this is a one-time writing down of book value of the group’s assets – intangible (goodwill) and tangible assets (non-operating or operating with less than usual cash flow generation possibility).
“The effect of this combined asset devaluation could be felt in the balance sheet as well as in profit and loss account as a loss,” explained the accounting head of a global consultancy firm.
The non-cash charge, Tata Steel said did “not affect any of its financial covenants and its funding position”.
The group, consisting of its Indian, European, South African and South East Asian operations, apprehending continuation of severely depressed conditions over the short-to-medium term has taken the impairment charge. It said steel demand fall “led to a downward revision of cashflow expectations and the valuation of the Groups’ European operations”.