Directors of Stanbic IBTC Bank on Tuesday got the blessing of shareholders to write off total goodwill of about N46.585 billion arising from the mergers it undertook in 2005 and 2007 involving four banking institutions.
This was contained in an explanatory statement to the shareholders by the chairman of the Bank, Mr. Atedo Peterside.
He said the decision to write off the goodwill was in line with a Federal Government Statutory Regulation entitled Order SR/2008/1, which required registered companies to "recognize goodwill acquired in a business combination as an asset; test it for impairment annually or more frequently if events or changes in circumstances indicate that it might have been impaired; (and) recognize impairment losses arising from goodwill immediately in the profit and loss account of the year."
The regulation published, but became effective from January 1, 2008, he said, has a significant on the bank, which has been under obligation to reinstate the goodwill that had been previously written-off from the special reserve accounts created for the purpose with shareholders and court approvals.
A breakdown of the figure showed that goodwill arising from the merger of Investment Banking & Trust Company, Chartered Bank and Regent Bank in 2005 stood at N9.75 billion; while the subsequent fusion of IBTC Chartered Bank and Stanbic Bank Nigeria amounted to N36.834 billion.
According to him: "The bank in accordance with the terms of SAS 26 tested the goodwill on its books for impairment and as its calculation indicate that there is a full impairment of the goodwill relating to both the 2005 merger and the 2007 merger, the requisite accounting adjustments have been made to our 2007 financial statements, which now reflect the fact that there is an accumulated loss of N37.264 billion in our books."
Continuing, he cited Section 17 (1) of the Banks and Other Financial Institutions Act Cap B3 (2004), barring banks from paying dividends on its shares until all preliminary expenses, organizational expenses, shares selling commissions, brokerages amount of losses incurred and other capitalised expenses not represented by tangible assets have been completely written off.
The entire goodwill is to be written off from the special reserve accounts created from the reductions in the bank’s share premium as approved by the shareholders in 2006. Following the approval, the bank will seek the approval of the Federal High Court to undertake the write-off.
He assured shareholders that the proposal will not have any effect on their shareholding or the rights attached thereto.