The Research On Goodwill Impairment Of Guangyi Technology Company

Since the M&A events boomed in China’s capital market in 2014,the total M&A goodwill of listed companies has increased significantly year by year.While the problem of large goodwill impairment has become increasingly serious.According to China’s current accounting standards,the part of the consolidated consideration that exceeds the fair value share of identifiable net assets on the merger date is recognized as goodwill.The company plans to take large goodwill impairment is often greedy for the temporary growth of performance and blindly pay high consideration,which leads to the decline of performance in the future.From the perspective of follow-up measurement and impairment motivation,the current follow-up measurement method of goodwill provides an opportunity for listed companies to conduct earnings management on goodwill,making it difficult for financial reports to provide users with authentic and reliable information.There is still a large space for the research and discussion of goodwill impairment.Based on the above background,this paper adopts the form of case analysis to analyze the reasons and motives for the huge impairment of goodwill and the imperfection in the subsequent measurement of goodwill.And it puts forward corresponding improvement suggestions.This paper firstly sorts out the theories related to goodwill and previous research results,which lays a theoretical foundation for the writing of this paper.Then it introduce the Guangyi technology,which calculated large goodwill impairment.On April 11,2018,Guangyi technology’s performance changed from a profit of 48.48 million yuan to a loss of 63.79 million yuan in the whole year attributable to the parent company to a loss of 383.71 million yuan.Its stock price dropped by more than 20%,causing heavy losses to investors.Aiming at the case,this paper first introduces the background of the acquisition of sorui electric by opto-tech,and then analyzes the causes of goodwill impairment from three aspects: initial recognition of goodwill,management decision and earnings management motivation.After analysis,this paper believes that in terms of initial recognition,the payment of high premium is an important reason for the huge impairment of goodwill.The high valuation of the underlying asset,the use of share payment for consideration and the transfer of management interests can lead to high premium.In terms of earnings management motivation,due to the strong subjectivity of the current follow-up measurement method of goodwill,the provisions on impairment test are not specific enough.The disclosure requirements are too lax and relevant institutions pay insufficient attention to the relevant violations of enterprises.These give enterprises the opportunity to use goodwill impairment for earnings management.In view of the above conclusions,this paper proposes to standardize the initial recognition of goodwill and strengthen the supervision of third-party evaluation institutions.What’s more,it aims to improve the information disclosure system of related evaluation reports and stipulate the third-party evaluation institutions bear the joint and several liabilities,so as to standardize the evaluation process of the assets of M&A events.Secondly,it is suggested to adjust the subsequent measurement method of goodwill,to adopt the method of combining systematic amortization and impairment test to simplify the subsequent measurement,it can reduce the subjectivity of operation and the operating space of earnings management.Finally,it is suggested to improve the disclosure of accounting information related to goodwill,expand the scope of information disclosure,such as the basis of identifiable net assets recognition,impairment test process,discount rate and related parameters,etc.Concurrently it can narrow the scope of independent choice of enterprises to adopt mandatory disclosure,then impose penalties on enterprises that fail to disclose relevant information as required.