1MDB’s predicament can be summed up as follows:
Its assets amount to RM51.4bn
Its liabilities RM49.0bn
But 1MDB’s assets include ‘goodwill’ of RM3.3bn less RM1.2bn already written off. (Goodwill here refers to the amount it paid for power assets less the actual value of those assets. The Edge calls it an “overpayment”.)
Its assets also include RM5.0bn in revaluation gains mainly on its land bought cheaply from the government.
If not for these non-cash items i.e. ‘goodwill’ and property revaluation surplus, 1MDB’s equity would have been RM4.7bn negative (i.e. not a pretty picture) instead of RM2.4bn positive.
These items have enabled 1MDB to show rosier bottom-line figuures than it otherwise would have posted in the last few years.
And let’s not forget the assets also include the billions parked in the Cayman Islands.
Figures from The Edge, 17 November 2014