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CMC, Ritek estimated to see big asset value losses based on new financial accounting standards

CMC, Ritek estimated to see big asset value losses based on new financial accounting standards

Optical Storage Apr 17,2005 0

According to DigiTimes, CMC Magnetics and Ritek suffer large decreases of an estimated NT$4.7 billion and NT$5.0 billion respectively, in total asset value pursuant to the new accounting rules “Accounting Standards for Asset Impairment”, according to institutional investors in the local stock market.

The “Accounting Standards for Asset Impairment”, formulated by the Financial Accounting Standards Committee of the Accounting Research and Development Foundation, a government-sponsored R&D organization, came into force on July 1, 2004. Covering fixed assets, idle assets, intangible assets (such as good-will) and equity in non-operating investments, the rules stipulate that the book asset value not exceed the recoverable value from the market, the market value simply speaking, and not be the original acquisition cost.

Both of CMC and Ritek have suffered large losses from non-operating investment. In addition, the two companies should record decreases in the book value of their manufacturing equipment to reflect continued drops in price of optical discs last year, according to the new rules. Since the two companies prefer one-time recording of these losses to allowable apportion of these losses in several times (years), they definitely suffered a great deal in their 2004 financial reports, these institutional investors pointed out.

However, the erosion of total asset value is essentially book loss rather than real losses as reflected by outflow of cash and therefore does not mean deterioration of the two companies’ operating health, the investors emphasized.

Tags: CMC MagneticsRitek
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