Cost Of Capital And Impairment Testing Study: 2012

Foreword

Cost of capital and impairment testing as required by global financial reporting standards, continues to be an area of great interest to executives, investors, analysts, standard setters and regulators. The beginning of the last decade saw a high growth phase across many sectors, regions and countries only to be cut short by the financial crisis, from which much of the world is still recovering. The increased cost of capital during this time saw many acquisitions and projects being deferred but eventually companies across the globe realised that despite the persistent bearish market conditions, they needed to grow and find investment opportunities for their shareholder funds. As a result, coming out of the financial crisis period in South Africa, we have noted an increase in deal volumes in recent years, but a severely declining trend in deal values. Surprisingly, despite the low deal values, many transactions are still resulting in goodwill premiums