Research On Merger And Acquisition Goodwill Accounting

Since the reform of non-tradable shares in 2006,China has set off a hot wave of mergers and acquisitions(hereinafter referred to as M&A),both quantity and turnover of which has gone all the way up.Although the 2016 A-share market experienced the most stringent regulation in history,with the number of M&A decreased from 6497 in 2015 to 4354,the scale continued to grow,up to 3.012 trillion yuan.At the beginning of 2016,China put forward the structural reform of the supply side,and on this basis,advanced five structural reform tasks,namely,capacity reduction,de-stocking,deleveraging,cost reduction,and underdeveloped areas improvement.As one of the best ways to integrate and upgrade the industry,M&A once again ushered in the development opportunity.In this background,goodwill has become an important asset in the financial statements.According to WIND data,the number of A-share listed companies recognized goodwill in financial statements reached 1442,accounting for 51% of the total listed companies,and amount of goodwill is 5716.87 billion yuan,up 74% over 2014.A fully understanding and proper accounting treatment of goodwill could help companies use their own resources effectively and enhance competitiveness.Also it is helpful for the accounting information users to understand the quality of the assets and make the appropriate decision.However,due to the complexity of goodwill itself,the study and debate on goodwill has never stopped,yet a consensus has not been reached.At the same time,there are many problems in the implementation of goodwill accounting standards.International Accounting Standards Board(IASB)has recently undertaken a post-implementation review of IFRS 3,aiming to identify,?any unintended consequences? following the introduction of the standard.There has been renewed interest in this issue since the findings of the post-implementation review of IFRS 3.This paper adopts the method of normative research to systematically summarize and elaborate the goodwill accounting.Specifically,starting from essence of goodwill,this paper firstly analyzes A-share listed companies' application status of the goodwill accounting,find problems and find out why,and then,summarizes the latest research of IASB and FASB,and establishes a theoretical model to analyze the initial recognition and impairment of accounting goodwill and economic goodwill,with a view to explore the best criteria of goodwill recognition and measurement,finally put forward the proposal.In initial measurement,statistical analysis of listed companies in China shows that,a large number of companies overestimated goodwill.Under the residuum approach in accounting standards,goodwill has evolved into the ?residual container?,which contains many elements that are not goodwill and deviates from the economic essence of ?excess profitability?.Also,a theoretical analysis of goodwill shows that,accounting goodwill deviates from economic goodwill,including the overpayment/underpayment and the measurement error of the transfer consideration.Therefore,this paper puts forward the idea of purifying goodwill,doing separate treatment to content that does not conform to goodwill,and improving the recognition and valuation of identifiable intangible assets.In subsequent measurement,the statistical analysis of listed companies in China shows that,goodwill write-downs are frequent,and managers often delayed reporting the impairment until years after value deterioration occurred.Besides,goodwill allocation and the recoverable amount determination are full of difficulty.Analyzing the immediate write-off,amortization and impairment test,we find the impairment test is the most reasonable subsequent measurement method.Then,theoretical model indicates that the current impairment-only approach creates a buffer that protects accounting goodwill from impairment,and consequently,the impairment test will understate the economic loss.Therefore,we propose changing the impairment test procedure so that the same measurement and recognition criteria are employed as at initial recognition.