RE:RE:RE:RE:Chorus Aviation Announce 4th Quarter and 2020 YE ResultsTakafuji wrote:
Well I'm not selling yet, so you probably don't want to them to be like me. Well as per the critical accounting method notes, the impairments are done when they have reason to believe the recoverable amount is less than the carrying amount of the assets. It's a fictitious amount now but is assumed going to be the most likely case either through I'm assuming future cash flows from lease renegotiations, and/or expected lowered resale/disposal value after lease. I just don't like the unpredictability of the impairment charges. Q2 and Q3 had relatively low impairment charges comparatively. I guess I would like more guidance as to how much impairments to expect as it seems impairments are not over yet.
Accounting wise, the value of assets on the balance sheet is either the current market value or the value of expected future cashflows. It is not any surprise that the market value of the aircraft or the expected cashflows (considering they have unleased planes sitting around) are down. As such, I think that this isn't anything "new" to those that follow Chorus and the current share price which gives very little current value to the leasing business is likely already discounting much more than what's assumed by that impairment.
That being said, impairments will lower future amortization "charges" , so it is a neutral tradeoff long term on net profitability by itself (because the lower cashflows expected would have happened regardless of the impairment).