Melco Resorts & Entertainment’s Hong Kong-listed parent company says it expects the casino operator will record “impairment on certain assets” relating to Studio City’s Phase 2 development, increasing by up to HK$956 million (US$120 million) its net loss for 2024.
In accounting, an impairment is a permanent reduction in the value of a company asset.
In an announcement to shareholders dated 14 March, Melco International Development Limited explained that the impairment appeared to be between HK$838 million and HK$1.02 billion (US$105 million and US$128 million), resulting in a group-wide net loss for the year of between HK$1.59 billion and HK$1.78 billion (US$199 million and US$223 million).
Even with the impairment factored in, the company’s net loss would still be narrowed in a year-on-year comparison – down from a loss of HK$3.49 billion (US$437 million) in 2023.
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The impairment was also described as “non-cash” in nature and Melco International Development said it would not impact the casino operator’s cash flow, operations or liquidity.
“Impairment testing is conducted on a periodic basis in accordance with HKFRS [Hong Kong Financial Reporting Standards,” the statement said.
“The estimated impairment results primarily from the long-term discounted cash flow valuation method required under HKFRS given the longer than expected ramp up of operations following the opening of Studio City Phase 2.”
The statement noted that “No such impairment is required under United States Generally Accepted Accounting Principles as impairment testing is conducted based on long-term undiscounted cash flows and therefore, no impairment was recorded in the financial statements of our listed subsidiary Melco Resorts & Entertainment Limited as disclosed in the Company’s announcement dated 27 February 2025 in relation to the unaudited financial results for the fourth quarter and full year ended 31 December 2024 of Melco Resorts & Entertainment Limited.”
