AMP (ASX:AMP) share price on watch after revealing $325 million impairment charge

AMP has announced some additional impairment charges…

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The AMP Ltd (ASX: AMP) share price was a particularly poor performer on Thursday.

The financial services company’s shares fell 5% to $1.05 despite there being no news out of it.

Unfortunately, further pressure could be heaped on the AMP share price on Friday following the release of an announcement this morning.

Why is the AMP share price on watch?

All eyes will be on the AMP share price on Friday after it announced that it will recognise additional impairment charges of approximately $325 million post-tax in its FY 2021 financial results.

According to the release, the charges, which are mostly non-cash, reflect a comprehensive review of its balance sheet.

This includes the partial impairment of deferred tax assets, a write-down of intangibles, onerous lease contracts arising from lower future accommodation requirements and other impairments and adjustments, including a review of advice assets.

Management notes that the impairments bring forward a range of expenses as required by accounting standards.

The release explains that the impairments are expected to have an impact on capital of approximately $220 million and will be recognised as a significant item against statutory profit. However, they will not impact AMP’s underlying net profit after tax.

AMP was also quick to point out that it remains in a strong capital position, with a pro forma 30 June 2021 surplus of approximately $440 million.

AMP’s Chief Executive Officer, Alexis George, commented: “As we have developed our strategies for the post-demerger businesses of AMP and Private Markets we have reviewed our balance sheet to ensure that assets recorded are in line with the future strategic direction. The charges are mainly non-cash and related to legacy issues, and our action will ensure that both businesses are in a stronger position to take advantage of opportunities in the future.”

The AMP share price is down 33% in 2021.

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