According to a company filing to the United States Securities and Exchange Commission on Wednesday, Walt Disney expects non-cash pre-tax impairment charges ranging from $1.8 billion to $2.4 billion for the quarter ending March 31 as a result of the write-down of net assets and goodwill at Star India following its separation from Disney.
The impairment costs are the result of a merger deal between Walt Disney and Reliance Industries Ltd (RIL), which planned to create a $8.5 billion media behemoth by integrating Star India and Viacom18.
"In connection with the transaction, the company determined that Star India should be classified as held-for-sale. In the current quarter, the company expects to record non-cash pre-tax impairment charges estimated to be between $1.8 billion to $2.4 billion, approximately half of which reflect a write-down of the net assets of Star India in order to adjust them to fair value (less estimated transaction costs) pursuant to held-for-sale accounting and approximately half of which reflect a write-down of goodwill at the entertainment linear networks reporting unit, reflecting the impact of removing Star India," the Walt Disney filing stated.
The definitive binding agreement indicates that RIL and Viacom18, owned by Bodhi Tree, will unite to form Star India. RIL and Viacom18 will own the bulk of the proposed amalgamated firm, with a 63% stake. Meanwhile, Disney will keep 37% ownership.
RIL also intends to invest $1.4 billion in the united firm to support its future expansion aspirations.
The statement also stated that under the held-for-sale accounting system, Walt Disney will "continue to adjust the net book value of Star India to fair value (less estimated transaction costs) until the closing date of the transaction."
"Thus, the company may recognise incremental gains or losses each reporting period as a result of changes in the net book value and/or estimated fair value of Star India (e.g., due to operating results or foreign exchange rate changes, etc.) until the transaction has closed," as per the company.
