Research On The Impairment Of Goodwill Of M&A With High Premium

In recent years,mergers and acquisitions with high premium and high performance have increased dramatically,which is caused by the acquiee's promise of high performance,the overconfidence of the management of the acquiee and the overestimation of the synergies between them.For asset-light enterprises,excessive valuation will generate a high premium.However,the acquiee fails to fulfill its performance commitment and the synergies fall short of expectations,which will have a negative impact on the acquiee's performance.At the same time,the rapid rise high premium on mergers and acquisitions lead to the carrying value of goodwill,the practice proves that the valuation of the technology in China,goodwill initial and subsequent measurement research still need further perfect,the a-share listed companies of the carrying amount of goodwill continues to grow and make huge impairment after bring negative effects,makes the goodwill problems highlighted increasingly.Therefore,through the analysis of the case of Oriental Seiko's acquisition of Pride at a high premium resulting in high goodwill and then the provision of a large goodwill impairment,this paper reveals the reasons for the impairment of goodwill and the economic consequences in practice,and puts forward relevant Suggestions,trying to enrich the relevant knowledge system and practical reference.Firstly,this paper adopts the literature research method to introduce the definition of goodwill,initial recognition of goodwill,subsequent measurement,reasons for goodwill impairment,economic consequences and risk prevention and other related literature review and related theoretical basis in detail,laying a foundation for subsequent research and discussion.First of all,from the two sides after the merger synergies,high performance commitment and assets evaluation three angles to analyze the cause of the high premium to mergers and acquisitions,studies the traditional income approach in the application of high performance promise enterprise valuation is insufficient,resulting in high prices is the main factor to merge,three phase model is more suitable for high performance promise enterprise value evaluation.Secondly,combined with the requirements of accounting standards,thispaper analyzes the reasons for goodwill impairment from the three aspects of enterprise profitability,initial recognition of goodwill and impairment provision,and concludes that the main reasons for large goodwill impairment are the irregular provision of goodwill impairment,and the intangible assets of initial recognition of goodwill are not fully recognized,etc.Thirdly,from the perspective of short-term market reaction and financial performance,this paper analyzes the economic consequences of the huge goodwill impairment,and draws the conclusion that the huge goodwill impairment has a significant negative impact on the stock price in the short term,and seriously affects the profitability and solvency of enterprises.Finally,this paper puts forward the following Suggestions: First,to improve the valuation technology,the enterprise valuation with high performance commitment to select an improved income method,namely the three-stage evaluation model valuation,and improve the objectivity of the valuation parameter selection,can effectively prevent the enterprise valuation is too high.Second,purify goodwill,fully remove intangible assets and other non-goodwill impurities,so that the value of acquired goodwill is close to its true value.Thirdly,impairment test method and amortization method are used to measure goodwill to prevent the management from manipulating profits.