An Empirical Study On The Influence Of Purchased Goodwill On The Proiftabijity Of The Business

The development of science and technology has bound Economic among countries inthe world ever more tightly together, showing the integrative development trend. How toget the greatest benefit in a limited market, many companies are doing everything toreduce costs and gain a competitive advantage which in order to ensure the survival anddevelopment, more and more companies using a business combination to achieve itsstrategic development goals. Goodwill on business combinations as an important asset listin the consolidated Financial Position Statement, it play an important role in real income ofthe enterprises and the future development. Because generated goodwilll should not bereliably measured, so is not recognized, nor confirm the negative goodwill. The goodwillof this study only include the Positive goodwill arising on business combinations.This article uphold the goodwill essential point which is “the excess return”. Then itchooses the financial data of the listed companies from2003to2010as the sample,research and analyzes the trend of impact on the profitability of the business of the twoaspects of purchased goodwill of "quantity" and "quality" through empirical study, usingthe ROA to reflect the profitability of the business. The first part is about the purchasedgoodwill "quantity", Using the methods of correlation analysis and regression analysis, thethesis inquired into the relationship between purchased goodwill and the profitability of thebusiness. The second part is about the purchased goodwill "quality", Using the methods ofindependent sample t-test and paired samples t-test, the thesis inquired into whethergoodwill impairment impact on profitability.The findings are as follows: in the first part of the study all enterprises compared toshow whether the holding of goodwill there are differences in the profitability of eachenterprise, but the difference was not significant. Longitudinal comparisons show that inthe short term of1year whether a company holds goodwill has significant effect on thecompany’s profitability. In the long-term stage of4years it shows significantly positiverelationship between the goodwill and the ROA, indicating that he goodwill andprofitability of the business does not exist a linear relationship in short-term, but in longtime the relationship is exist. Goodwill can help enterprises to achieve earnings. Thesecond part whether the impairment of goodwill in the business horizontal comparisonshows that the ROA in no impairment of goodwill of the company is higher than theprovision for impairment of goodwill of the company. Longitudinal comparison shows thatthe ROA is significantly different before and after goodwill impairment, the ROA isdecreased in the sample companies provision for impairment of goodwill. From the other side show that The New Accounting Standards carrying into execution,the provision forimpairment of goodwill of listed companies is based on its declined future earning power.Finally, recommendations are given from two aspects, one is about how to improvethe management of purchased goodwill and the other is about goodwill impairment testing.and puts forward the direction of the further research on goodwill.