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I worked for a department store chain for many years. We had some stores that were not so great. Under these rules, we had to take an impairment charge against the value of these stores (to the tune of $10 million).
This was devastating to our stock as our earnings dropped significantly in one year. After that, our earnings were artificially inflated because these same stores no longer had any depreciation.
I feel like the only thing this accomplished was the accounting firm made an extra $100k per year because all of our properties, that had poorer than average sales, had to be valuated each year (funny, I did the pro-formas on these stores and never once was one of my values changed by our CPA). This rule only added administrative work and costs to the company.
As far as valuing a store for the purpose of a sale....no potential buyer would ever use the book value of this type of asset anyway so what was the point?
My $0.02 cents
Last edited by Tidybuoy; 10-29-2008 at 08:14 AM..
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