Research On Subsequent Measurement Of Goodwill In Listed Companies

In recent years,with the further deepening reform in China,the demand for the integration of industries and resources is becoming increasingly obvious.More and more listed companies begin to expand their businesses and improve their operations by acquisitions.It is generally believed that synergies can be achieved through acquisitions to improve corporate performance,but goodwill will inevitably be generated in the process of acquisitions.Goodwill represents excess profitability,which is the most difficult enterprise assets to identify and measure.With the wave of the mergers and acquisitions,more and more enterprises have high goodwill.The number of companies that have goodwill and the amount of impairment of goodwill are also increasing,which has triggered a huge goodwill storm and performance reversal of listed companies in the capital market at the beginning of 2019.The substantial impairment of goodwill caused the company’s performance to decline significantly,which brought great shock to the capital market,and made more and more people begin to pay attention to the impairment of goodwill.This paper mainly research on the problem of the subsequent measurement of goodwill,it studies the problems existing in the follow-up measurement of goodwill in listed companies,analyzes the reasons behind the problems,and puts forward the corresponding improvement methods.This paper adopt the method of case study,selecting the case of Hubei Boying(later renamed Steyr Motors)merged Wuhan Wutong(later renamed jiangsu Steyr)to research the problem.Firstly,it introduces the process of formation and initial measurement of goodwill.And then it analyses the situation and economic consequents of follow-up measurement of Steyr’s goodwill.According to the actual business situation,this paper identify the problems that exist in the follow-up measurement including unreasonable asset group division,over-valuation in recycled amount of initial recognition,a lack of consistency in initial measurement and subsequent measurement,and a time lag in goodwill impairment.From the perspective of method and operation,this paper finds the following there reasons of the problem.First,the impairment test method has some defeats in the valuation of goodwill,these defects will provide managers with the space of independent choice.Second,the initial measurement of goodwill is beyond the real value,which brings great pressure to the follow-up measurement.Besides,the managers have the motivation to use the subjective defects of the impairment test method to obtain their own interests,they turn goodwill follow-up measurement into earnings management tools.Through the analysis of the above problems and reasons,this article propose the following suggestions to improve the goodwill follow-up measurement of listed companies,mainly includes three aspects.One is from the accounting standards,it can improve the current impairment test method by establishing asset group confirmed guide and using fair value to measure recoverable amount of asset groups preferentially.It may prevent the problem of "too little and too late" of goodwill impairment and strengthen the objectivity and reliability of goodwill impairment test method.At the same time,this paper puts forward the method of combining impairment test method and system amortization method together.It may restrain the accumulation of "goodwill bubble" and reduce the phenomenon that the value of goodwill in the early stage of subsequent measurement is not reliable.Second,from the perspective of enterprises,it is proposed to strengthen risk assessment and select the acquired company reasonably.When it comes to M & A,the enterprises should measure the value of the target company seriously,confirm the value of goodwill on the basis of fully considering the subsequent impairment of goodwill.And it should strengthen internal supervision to prevent earnings management.Third,it should accelerate the development of the securities market,strengthen external supervision,and reduce M & A of listed companies for the purpose of "capital speculation and interest transmission".It also should enhance the investment capacity of investors,and reduce "short-sighted investment".Besides,the external supervision is needed to be strengthened,making it more expensive for enterprise managers to manipulate the follow-up measurement of goodwill,enhancing the independence of asset appraisal institutions,and reducing the collusion between asset appraisal institutions and enterprise managers.