Analysis On Accounting Treatment Of Goodwill Of Hengkang Medical Group Co.,Ltd

Since 2014,with the strong support of relevant national policies,the number of market participants participating in mergers and acquisitions(M&A)and reorganization activities has increased,M&A and reorganization activities have been craze gradually in China's capital market.In this context,more and more companies on the market are implementing M&A and reorganization activities by paying a high premium,which causes the capital market to generate and accumulate a large amount of goodwill.Generally speaking,enterprises will show a prosperous performance during a certain period in the early stages of M&A activities,which is mainly behaved the double growth of revenue and profits.There will cause some goodwill problems.The huge impairment of goodwill and the high financing costs caused by the excessive speed of M&A activities will directly affect the company's performance,even affect the company's stock price seriously and damage the interests of investors.In recent years,such goodwill chaos in the capital market has been appeared repeatedly.Therefore,how to deal with the goodwill accounting issues properly and eliminate the adverse effects on the company in time has become a common problem faced by all companies implementing M&A activities.How to reduce or eliminate the negative impact of goodwill impairment on companies implementing M&A activities has become a major practical issue that has been valued and studied by the theoretical and practical circles.Based on the above background,the article deeply analyzes the accounting treatment of goodwill.In order to study the common problems of goodwill accounting in the current capital market M&A activities,a representative case about Heng Kang Medical Group was analyzed in this article,Based on the analysis of the formation of huge amounts of goodwill,the issue of goodwill impairment and information disclosure was analyzed mainly.The conclusions of the study are drawn based on all the analysis and then some suggestions were put forward,which enrich the relevant research on goodwill accounting.The first part of the article introduces the market background and theoretical and practical significance of the case study in this article,sorts out the domestic and foreign literature related to goodwill.In addition,it gives a general introduction about the research methods and basic framework of this article.The second part mainly summarized related concepts and accounting treatment methods of goodwill,and the standard system related to the accounting treatment of goodwill in China is introduced as the theoretical basis and standard support for the case analysis in this article.The third part first introduces the overview of the case in this article,and the situation about goodwill,followed by a detailed description and analysis of the whole process of the goodwill accounting treatment of the case,and finds some problems.The fourth part is an in-depth analysis of the goodwill problem of the case in this article.First,it summarizes the problems found in the third part,secondly analyzes the internal and external causes of the goodwill problem of the case object,and finally analyzes the relevant data from a financial perspective.On one hand,it analyzes the adverse effect of irregular goodwill accounting since frequent M&A activities and irregularities in recent years,on the other hand,analyzes whether its financial data can return to normal assuming that it is in accordance with the standard of goodwill accounting,thereby further demonstrating the importance of standardizing goodwill accounting.The fifth part is the relevant countermeasures and suggestions of this article.On one hand,based on the detailed analysis of the problems existing in the case,the corresponding solutions are proposed.On the other hand,the corresponding suggestions and future prospects are proposed from the macro-institutional level.By analyzing the research cases of Heng Kang Medical Group,the problems existing in the process of goodwill accounting of enterprises are mainly divided into the following four aspects: first,the valuation of the goodwill initially recognized is unreasonable,a large amount of goodwill has accumulated in book,and causes excessive financial pressure on enterprises;second,the operation of the goodwill impairment test is not standardized,which causes the company's performance volatile and financial data distorted;third,the disclosure of information on the M&A activities process is incomplete,investors are unable to obtain useful information in a timely manner,and at the same time cause difficulties in market supervision;the fourth is the imprecise corporate financial system and internal control,there is the phenomenon of using goodwill impairment to manipulate profits.Through in-depth analysis of the problems found in the case and reasons,and the adverse financial effects,the following aspects should be taken to improve the accounting treatment of goodwill.First,the initial recognition of goodwill needs to be improved,the requirements for review and evaluation of goodwill assets should be strengthened.Meanwhile,not only the M&A transaction system needs to be improved but also external supervision needs to be strengthened.Secondly,the specific operating methods of the goodwill impairment test should be detailed and the relevant accounting system needs to be improved.Moreover,subsequent measurement model of the system amortization method in a timely manner can be introduced to meet the requirements of reliability,comparability,and relevance of accounting information.Finally,a more complete and specific information disclosure system should be formulated,and the supervision of accounting information disclosure should be strengthened continuously to gradually enhance the effectiveness and complete transparency of capital market accounting information and promote the healthy and orderly development of China's capital market.