Goodwill Impairment Risk Of Listed Companies And Its Prevention And Control Measures

In recent years,the supervisory authorities have introduced a number of favorable policies to stimulate economic development,which has triggered a wave of mergers and acquisitions by listed companies,which has led to a boom in mergers and acquisitions and reorganization in China in recent years.In the past two years,the Securities Regulatory Commission issued Accounting Supervision Risk Announcement No.8 and the Ministry of Finance’s topic on "goodwill and its impairment" and the performance of "mines" that frequently erupted due to the impairment of goodwill.The academic research value and practical significance of prevention and control measures have been highlighted.Therefore,this article focuses on the risk of goodwill impairment and prevention and control measures,and uses case studies as an analysis tool to explore the causes of the risk of goodwill impairment deeply,subsequent measurement methods of goodwill,and preventive control measures.Dongfang Precision’s acquisition of Pride Power occurred in 2017.After achieving Pride Power performance targets in 2016 and 2017,Dongfang Precision’s net profit attributable to the parent company soared.However,the two sides were at odds about the performance in 2018.According to Dongfang Precision’s 2018 annual report,it thought the related transaction between Pride Power and its original shareholders is not fair.The net profit loss for the year was 219 million yuan,which eventually led to Dongfang Precision withdrawing 3.848 billion yuan of goodwill impairment losses in the fourth quarter of the year.The performance turned from profit to loss,and the seven-year profit lost once.This is a typical case of high-value mergers and acquisitions,but Dongfang Precision was trapped in the "Rashomon" incident deeply in 2019.It bought 4.75 billion three years ago and sold 1.5 billion today,which makes people want to delve deeper into the reasons behind it and what factors have led to such a high risk of goodwill impairment.Is it related to the two announcements issued by the regulators? How will the subsequent measurement of goodwill affect the company? The case is of great research value.After reviewing relevant literature and theoretical basis of goodwill impairment risk and prevention and control measures,this paper firstly analyzes the impairment of goodwill to understand its possible economic consequences,and briefly summarizes the background of the case merger and acquisition.Then,this paper comprehensively analyzes the basic situation of both sides of the merger,the purpose of the merger,the plan and the result of the merger.From this point of view,it explores the risk factors leading to the impairment of goodwill from four perspectives,analyzes the influence of the subsequent measurement method selection on the impairment risk of goodwill,and finally puts forward targeted risk prevention and control measures.From the perspective of both sides of the merger,it is suggested that the merger process rationally value the objects of the merger,actively participate in the business decisions of the merged party after the merger,and reasonably allocate personnel.From the perspective of the formulation of the merger and acquisition transaction plan,the merger and acquisition plan based on cash and the signing of reasonable performance compensation commitment should be adopted to start with the prevention and control of pre-risk,so as to avoid the overvaluation of goodwill and reduce the impairment risk of goodwill.From the perspective of supervision,it is suggested to improve the followup measurement method of goodwill,adopt the amortization plus and minus value parallel method,improve the quality of accounting information,resist the risk of goodwill impairment,and at the same time,improve the supervision of information disclosure and strengthen the supervision.The shortcoming of this paper is that the study from a single case is typical but not universal,and the data of this case study is limited,so more abundant data are needed to ensure the objectivity of the conclusion.It is believed that more scholars will analyze and classify various types of goodwill impairment cases in the future,providing more comprehensive and in-depth theoretical and practical guidance for the prevention and control of goodwill impairment risk.