Rakuten forecasts JPY103bn impairment loss for Q3 2019 due to Lyft investment

Maria Nikolova

In the three months to end-September 2019, an impairment loss of approximately 103 billion yen is expected to be recorded as a “Share of loss of investments accounted for using equity method”.

Tokyo-based online services provider Rakuten Inc (TYO:4755) has earlier today published a forecast about an impairment loss of 103 billion yen that the company will report for the quarter to September 30, 2019.

Rakuten explains that it has been applying the equity method to its stock investment in Lyft, Inc., but in the three months ended September 30, 2019, an impairment loss of approximately 103 billion yen is expected to be recorded as a “Share of loss of investments accounted for using equity method” in the summary quarterly consolidated financial statements.

Rakuten decided that because the market price of the shares of Lyft have fallen significantly, there is objective evidence that it is impaired. This result is based on the closing stock price on the last day of the three months ended September 30, 2019, and measuring the recoverable value and comparing it to the book value.

Details will be announced in the company’s financial results announcement scheduled on November 7, 2019.

Let’s recall that, early this year, Rakuten said it was about to record a loss of JPY 28.4 billion in the second quarter of its fiscal year 2019 as a result of a change in the accounting method applying to shares in LYFT Inc (NASDAQ:LYFT).

In an announcement on its website, Rakuten back then explained that the shares of Lyft that Rakuten holds had previously been measured at fair value through profit or loss. However, it was decided that the equity method will be applied from the second quarter of the fiscal year ending December 2019 because, among other considerations, Rakuten owns shares and, through its own appointed director, is actively involved with the board of directors, and can therefore exercise significant influence over Lyft.

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