Discussion On The Issues Of Goodwill Impairment Of Humanwell Healthcare(Group) Co.,Ltd

With the prosperity of China's real economy and the increase of M&A(mergers and acquisitions)cases,goodwill valuation has become an unavoidable problem for enterprises.It has also become a trend to use impairment test method to measure the consolidated goodwill.Compared with those of developed capitalist countries,such as the United States,Chinese accounting standards on goodwill are not perfect.Because goodwill is unidentifiable,it is difficult to value goodwill in the area of accounting and asset evaluation.For example,the recognition of goodwill is relatively broad,the measurement method is not rigorous enough,and impairment test is difficult.Therefore,this requires the enterprise to make assessment in the goodwill,disclosure relevant matters of goodwill and other necessary detail in financial report.Pharmaceutical and biological industry is one of the most active industries in M&A in recent years.The goodwill scale of this industry,both in terms of the quantity of transactions and the value of transactions,was ranked at the top.As for the specific listed companies,in the past five years,the pharmaceutical and biological industry accounted for the largest proportion of the total assets of listed companies,both in the list of listed company whose the ratio of goodwill to total assets exceeded 50% and the list of listed company whose the ratio of impairment of goodwill to absolute net profit of listed companies exceeded 50%.As a member of the pharmaceutical manufacturing industry,Humanwell Healthcare(Group)Co.,Ltd had an original goodwill value of 6.8 billion yuan as of December 31,2018.However,the company suffer a huge goodwill impairment and turned a profit into a loss during 2018.Based on this phenomenon,this paper analyzes the phenomenon of goodwill impairment of Humanwell Healthcare(Group)Co.,Ltd,provides certain guidance for the practical application of goodwill impairment test method in enterprises and provides certain direction for the improvement of goodwill related criteria in China.According to the annual report of Humanwell Healthcare(Group)Co.,Ltd,inquiry letter of Shanghai stock exchange and financial news,the author analyzed the reason why the value of Humanwell Healthcare(Group)Co.,Ltd's goodwill decreased,found for reasons: firstly,excessive price for M&A brought huge goodwill which go with high risk of goodwill impairment;Secondly,the subsidiary's performance is not expected,it lead to the impairment of goodwill;Thirdly,the change of accounting policy will prompt the company's executives to use the bug of goodwill impairment test,to relieve the pressure on future performance.Then,based on the application of the goodwill impairment test method in Humanwell Healthcare(Group)Co.,Ltd,this paper analyzes that the enterprise used the goodwill impairment test method in a wrong way.The main problems in the process of the impairment test are: asset groups considered inappropriate,some indicators which is to calculate cash flow discount rate used improperly,the goodwill impairment test process is not complete,in addition,goodwill disclosure information is not complete and punctual.Then,this paper discusses the reasons for the above problems and looks for the root of the problems.The main reasons are as follows: firstly,the management failed to timely identify the impairment risk of goodwill in the optimistic expectation of future profits;Secondly,the relevant accounting standards are not specific,the subjective operation space is large;Thirdly,intermediaries do not fully understand the complex impairment testing methods;In addition,the system related to the disclosure of goodwill information is not perfect.Combined with the full text,I put forward some suggestions to improve the above problems: firstly,enterprises should be aware of goodwill impairment seriously;Secondly,accounting standards and asset evaluation standards should standardize the operation of goodwill impairment test method;Thirdly,evaluation agencies and audit institutions should push staffs to improve relevant professional quality;Fourthly,the relevant regulatory agencies should improve the information disclosure system and strengthen the supervision on the quality of goodwill information.