British American Tobacco PLC (LSE:BATS) today took a hefty £25 billion write-down to the value of its cigarette brands as part of the big tobacco group's "vision to build a smokeless world".
The non-cash adjusting impairment charge, as the write-off called it, related to a lower assessment of the value of its acquired US cigarette and tobacco brands as their "useful economic lives" decline over an estimated period of 30 years.
Significant write-downs such as this are notable events in corporate history, as they reflect major strategic shifts, or momentous market changes, or just disastrous investments or catastrophic business failures.
At £25 billion, BAT's is one of the biggest in UK corporate history, and for the industry it may feel like a seismic moment when big tobacco looks to persuade investors they are something more like a nicotine delivery platform operator. Or something.
Royal Bank of Scotland
In the UK, most of the largest single write-downs were in the wake of the 2008 financial crisis. The largest was from RBS, which reported a record loss of £24.1 billion for 2008, as the bailed-out bank took £16.2 billion in write-downs to the value of goodwill, £7.6 billion for the ill-fated purchase of ABN Amro and £4.3 billion for buying US-based Charter One in 2004. RBS is now NatWest Group PLC (LSE:NWG).
Lloyds
Lloyds Banking Group PLC (LSE:LLOY) took impairments rose from £3 billion in 2008 to a steaming £24 billion in 2009, principally from its acquisition of HBOS. In 2011, Lloyds also announced a write-down of about £3.2 billion related to the payment protection insurance (PPI) scandal, one of the largest such charges among UK banks.
Barclays and HSBC
During the financial crisis, Barclays PLC (LSE:BARC) took write-downs of over £8 billion in 2008 but still made big profits. HSBC Holdings PLC (LSE:HSBA) likewise. Outside of that year, HSBC recorded a write-down of $6.2 billion (£4.7 billion at the time) on the sale of its Brazilian unit, reflecting the challenges in the Latin American market.
US banks
No surprise, but the US banks' losses from the sub-prime crisis were way bigger, starting in 2007. Topping the tree is Citigroup at roughly $39 billion ($18.1 billion during 2007 and $20.7 billion the following year). Swiss bank UBS, with $37.4 billion, according to a list of cumulative write-downs by Reuters made not even halfway through 2008, was just ahead of Merrill Lynch at US$33.9 billion. A few months later Merrill, on the verge of collapse, was taken over by Bank of America.
Vodafone
Currently best known to investors for its giant debt pile and its awful share price performance for the best part of a decade, Vodafone Group PLC (LSE:VOD) may also hold the crown for the biggest write-down in UK history. In 2006, the mobile telecoms group took a write-down of £28.4 billion, primarily due to poor performance of assets in Germany, Italy and Japan. This largely reflected the hostile £110 billion takeover of Mannesman in 2000, part of a broader trend of telecommunications companies facing difficulties after overpaying for acquisitions during the tech boom.
BP
Following the Deepwater Horizon oil spill in 2010, BP PLC (LSE:BP.) (BP PLC (LSE:BP.)) took a series of write-downs totalling $17.2 billion (£13.2 billion). These were related to the costs and anticipated future costs associated with the spill. That's far from all though, as the oiler has had to spend over US$70 billion on clean-up operations, compensation to locals and fines.
AOL (NYSE:AOL)
In the grand American tradition of doing everything bigger, at the end of 2002, AOL Time Warner took a gargantuan fourth-quarter charge of US$45.5 billion, in what the Wall Street Journal called an "astonishing end to a disastrous year". The write-down, which was mostly due to the crumbling value of its America Online unit as investors deserted dotcom stocks, led to the company, parts of which are now owned by Warner Bros Discovery Inc (NASDAQ:WBD) and Verizon Communications Inc. (NYSE:VZ), to report a net loss of $98.7 billion, which was more than twice the level Wall Street had forecast and the biggest annual loss in history.
GE
A big lightbulb moment in 2018 should have been General Electric's (NYSE:GE) $22 billion write-off relating to its power business, part of a broader restructuring effort as the company grappled with challenges in its power and oil and gas businesses, including its earlier acquisition of Alstom. However, while writedowns are often meant to draw a line under a problem, this only led to an investigation and eventual fine by the US financial watchdog for misleading investors by overplaying power profits in previous years.
Volkswagen
In the wake of the Dieselgate scandal, Volkswagen Group (XETRA:VOW) reported a write-down of over $18 billion in 2015, due to costs associated with the emissions cheating scandal, including fines, vehicle recalls, and legal costs.
Credit Suisse
More recently in Europe, Credit Suisse bondholders were forced to lick their wounds after the shotgun rescue deal by UBS resulted in a write-down of US$17 billion enforced by the Swiss central bank. One holders of AT1 bonds, which were introduced in Europe after the global financial crisis to serve as shock absorbers when banks start to fail, said it was "insane" and "against the law" as bondholders received nothing while shareholders walked away with 3 billion Swiss francs (US$3.2 billion), turning upside down the long-established norms of debt investors being prioritised over equity holders in a debt recovery.
Microsoft's
After all that, Microsoft's $6.2 billion hit related to its $6.3 billion acquisition of online advertising company aQuantive in July 2012 now seems tame - though was shocking to investors at the time to admit you overpaid by approximately 98.80%.
HP
Talking of overpaying, after buying FTSE 100 software group Autonomy for over $11 billion, Hewlett Packard later wrote off $8.8 billion of the value because of "serious accounting improprieties". This led HP to take Autonomy founder Mike Lynch and the company's former finance chief to court, claiming they "artificially inflated Autonomy's reported revenues, revenue growth and gross margins". Earlier this year, Lynch, who denies any wrongdoing, was extradited to the US to face criminal fraud charges.