A Research On Several Problems Of Listed Companies Merging Goodwill

Goodwill has been controversial since its inception.The academic community always has a different understanding of the nature of goodwill,and it is difficult to reach a consensus.There are also different accounting treatments of goodwill among different Accounting Standards.In recent years,with the continuous development of market economy and increasing activities of the capital market in our country,huge goodwill is generated by listed companies through activities of mergers and acquisitions which become increasingly popular.Especially in recent two years,goodwill accounting treatment has been brought to the forefront,because goodwill impairment causes great profit loss of listed companies.This paper is based on mergers and acquisitions and goodwill accounting in China A shares listed companies from 2013 to the third quarter of 2017,focus on particular case study of goodwill.This study reveals three problems.First,listed companies blindly optimistic and copycat hype,and tend to make accounting profit-generating choices,rather than more fair ones in accounting method selections,such as confirming acquisition date in advance,recording less goodwill value by lowering the cost of an acquisition price,not recognizing contingent consideration,reducing goodwill impairment loss through an optimistic estimate for the future performance of the acquired company,etc.Second,there are insufficient rules for the measurement of goodwill made by China Accounting Standards.The last,asset evaluation institutions have not been practicing prudently and become a push of high premium for acquisitions.To address above problems,this paper puts forward the following Suggestions:(1)On initial measurement of goodwill,combination cost of the acquisition day should be measured according to the fair value of the purchased asset,considering purchases of assets through issuing shares by listed companies are often in a short time,stock prices deviate from enterprise reasonable values;(2)On subsequent measurement of goodwill,method of combining amortization and impairment of goodwill should be adopted to reduce artificial inaccurate estimate and compress earnings management space.(3)To regulate the evaluation institutions to practice prudently,it is recommended to establish evaluation database for evaluators;(4)it is proposed to strengthen the supervision of merger,acquisition and reorganization of listed companies,establish a margin system for performance pledges,and standardize the information disclosure of goodwill.