Comprehensive Impairment Assessment
Valtech’s valuation team has recently completed a comprehensive impairment assessment for a waste management company, with a particular focus on the valuation of its fixed assets.
The Importance of Impairment Testing
Impairment testing is a crucial process that ensures an asset or cash-generating unit (CGU) is valued accurately and reflects its recoverable amount. For this project, the company needed to assess whether the value of its fixed assets had been impaired due to factors such as market changes, environmental regulations, or operational performance.
In this Valuation, we utilized two widely recognized methods to conduct the impairment testing:
Value in Use (VIU): This method calculates the recoverable amount of an asset or CGU based on its future cash flows, discounted to their present value. VIU allows the company to project future performance while considering factors such as regulatory changes, technological advancements, and long-term environmental goals.
Fair Value Less Costs of Disposal (FVLCD): In cases where VIU did not provide a definitive answer, we adopted the FVLCD approach. This method determines the fair market value of the fixed assets by evaluating the price achievable in an arm’s-length transaction, subtracting any costs related to the sale or disposal of the assets.
By employing both approaches, we ensured the assessment was thorough and aligned with international financial reporting standards. This dual-method strategy provided a comprehensive view of the company’s financial position and equipped stakeholders with the insights necessary for informed decision-making.
The Critical Role of Fixed Asset Evaluation
Within the impairment assessment process, evaluating fixed assets was a critical element. In industries like hazardous waste management, assets such as waste treatment plants, landfills, and incinerators are subject to complex legal and environmental considerations. A detailed understanding of the operational context, environmental compliance, and market conditions is essential to producing a reliable valuation.
Our team used advanced valuation methodologies to assess the market value and remaining useful life of these fixed assets. Factors such as replacement costs, technological obsolescence, and environmental requirements were carefully considered in order to identify any potential impairments and assess their impact on the company’s financial results.
The valuation of fixed assets is vital in industries that involve significant capital expenditures and long-lived assets, such as hazardous waste management. By integrating both cost-based and market-based approaches, we were able to provide a robust evaluation of the company’s asset portfolio. This approach not only helped identify potential impairments but also ensured that the company’s financial statements accurately reflected the true value of its assets, ultimately supporting better decision-making by stakeholders.
About Valtech Valuation
Valtech Valuation is a professional valuation firm accredited with ISO-9001 in valuation advisory services. The firm is renowned for its expertise in advanced valuation techniques, customized valuation models, data-driven insights, and adherence to compliance and reporting standards. The firm has a solid track record in valuation advisory for listed companies, private equity, fund managers, and financial institutions. Valtech’s qualified team comprises members with PhDs, CPA (HKICPA), CFA, Chartered Valuation Surveyors of the Royal Institution of Chartered Surveyors, and valuers accredited with Business Valuation (ABV) by AICPA and CVA qualifications in Singapore. Valtech continues to expand into more markets by leveraging its valuation platform and recruiting local experts.
