A Study On The Measurement Of Merged Goodwill Under The Condition Of Performance Commitment

In recent years,as the growth rate of macroeconomic endogenous growth has slowed down,more and more enterprises have adopted the M&A and reorganization method for extensional development,and the number of inter-enterprise performance commitment agreements has also increased.After the 2014-2016 M&A and restructuring boom gradually faded,the performance commitment began to convene a concentrated reporting period.However,in the past two years,The A-share market frequently broke the news that the target company’s performance promises were not up to standard,the listed company accrued huge amount of goodwill impairment provision,and further caused the listed company’s net profit to fall sharply.which has seriously damage the interests of many investors.The original intention of the performance commitment agreement is to encourage the target companies to improve their business performance,maintain fairness in M&A transactions,and reduce the risk of mergers and acquisitions under information asymmetry to protect the interests of M&A enterprises.However,in practice,performance commitment agreements place listed companies in the risk of significant goodwill impairment.Based on consideration of this phenomenon,this paper chooses from the perspective of accounting measurement to explore the reasons why the performance commitment leads to the huge risk of goodwill impairment,that is,the impact of the existence of research performance commitment conditions on the measurement of business merger goodwill.This paper first reviews the literature and theoretical basis related to performance commitment and merger goodwill measurement,and provides theoretical guidance for the research of the article.Then,it gives a preliminary understanding of the current performance of China’s listed companies and the status quo of the measurement of goodwill and its existing problems.Finally,combined with the specific case of Xinhua Medical’s acquisition of Chengdu Yingde,this paper analyzes the problems and causes of Xinhua Medical’s merger of goodwill measurement.The study found that the performance commitments cause huge risks of impairment of goodwill,mainly because: on the one hand,the current measurement method of goodwill and impairment test in China relies heavily on asset valuation results and assets.Most of the evaluation work adopts the income method,which has strong subjectivity,complexity and regulatory difficulty,which provides a possibility for the listed company to manage its earnings.On the other hand,performance commitments convey an “insurance” signal,and listed companies’ confidence in the future earnings of the target companies is enhanced,making it easier to make more optimistic earnings forecasts.In particular,when listed companies pursue rapid M&A expansion and have incentives for earnings management,they may sign excessive performance commitments and future earnings forecasts with the underlying companies,making the value of the companies that are subject to the income method greatly overestimated.High premium mergers and acquisitions directly lead to an overestimation of the initial value of the combined goodwill.In the subsequent measurement stage of goodwill,the listed company may be affected by the performance commitment or the performance commitment as the means of earnings management.If the goodwill is not timely and fully accrued,the business performance of the target enterprise will continue to deteriorate.Based on the research findings,this paper also proposes some suggestions for the company to sign performance commitments and compensation agreements,rational measurement of combined goodwill,and asset evaluation agencies and regulatory authorities.The conclusions of this paper supplement the current academic research on performance commitment and measurement of combined goodwill.I also hope that it can provide some reference for listed companies to reasonably measure the merger of goodwill under the performance commitment conditions,and better play the positive role of performance commitment..Of course,there are still some shortcomings such as insufficient data collection,insufficient relevant analysis,and insufficient comprehensive conclusions.It is expected that we will continue to pay attention to relevant research and cases in the future,and make further supplements and improvements for this research.