Impairment Testing of an Investment in a Subsidiary for a Holding Company

A Corporate Finance Case Study — Valuation

Client Snapshot

A holding company carrying its investment in an engineering and manufacturing subsidiary on its standalone books, required to test that investment for impairment as part of statutory audit.

The Challenge

Slow growth at the subsidiary had raised a genuine question of whether the carrying value of the investment on the holding company’s separate financial statements still held up. The statutory auditors needed an independent, defensible valuation of the subsidiary before sign-off — and the board needed to know the answer either way, on an audit-driven timeline.

What We Did

• Valued the subsidiary as a whole to determine the recoverable amount of the holding company’s investment, in line with Ind AS 36.
• Built a value-in-use model for the subsidiary using discounted cash flows, benchmarked assumptions against sector outlook.
• Cross-checked value-in-use against fair value less costs of disposal, using comparable transactions in the engineering and manufacturing space.
• Delivered a valuation report structured for the holding company’s statutory auditors, with assumptions documented for board and audit-committee review.

The Outcome

We had a clear, defensible answer for our auditors well before the deadline, with no last-minute scramble.

— Client