A Case Study On Goodwill Impairment Of EGLS Continuous Acquisitions

Since 2015,with the continuous expansion of the capital market and the relaxation of a series of policy of merger,the M&A events of listed companies in China have increased frequently.In order to expand their own scale and business scope,some enterprises blindly carry out premium M&A,resulting in a sharp increase in the amount of M&A a goodwill.In2018 and 2019,the impairment of goodwill broke out,and a large number of listed companies withdrew huge goodwill impairment reserves.From 2015 to 2019,the total goodwill of A-shares has increased from 645.1 billion to 1,260 billion,which laid a huge hidden danger for the later goodwill impairment.The loss of goodwill impairment of A-shares increased from 11.1 billion to 163.1 billion,with the growth rates of 95.31% and 1369.37%respectively.The risk of goodwill impairment in M&A is increasing.This phenomenon seriously hit the investors’ confidence in the capital market and caused a serious impact on the healthy development of the whole capital market.In view of this,this article selects EGLS Co.,Ltd.(hereinafter referred to as "EGLS"),which ranks second in terms of M&A goodwill impairment in 2019,to study the existing problems,causes and economic consequences of its M&A goodwill impairment,and to explore a more reasonable follow-up measurement method.Firstly,this article reviews the continuous M&A events of EGLS,and introduces the acquirer,acquireed,M&A motivation,goodwill formation and impairment,etc.Secondly,by combing the formation and impairment of the goodwill of EGLS,it is found that there are signs of impairment but no impairment,incomplete disclosure of goodwill impairment information,earnings management motivation and other problems.There are four reasons for the huge amount of goodwill impairment: one is the blind high premium M&A;the other is that the target enterprise’s performance commitment is not up to standard;the third is that the proportion of goodwill in assets is too large;and the fourth is that the impairment test method has disadvantages.Then through the trend analysis method and event research method to analyze the impact of a huge merger goodwill impairment.Then,based on the defects of the impairment test method,this article explores a more reasonable follow-up measurement method of goodwill by simulating the systematic amortization method and the combination of impairment and amortization method.Finally,it puts forward some suggestions to the standard institutions,such as refining the goodwill standard,optimizing the impairment test method,and restoring the system amortization method.It puts forward some suggestions to the merger and acquisition companies,such as carefully making M&A decisions,paying attention to the business integration of both sides.And it also puts forward suggestions on maintaining independence for intermediary agencies.2015 is the first year of M & A in the media industry,and the scale of goodwill impairment losses surged in recent two years.The huge amount of goodwill impairment seriously hindered the normal operation of enterprises and distorted the allocation of resources in the market.The media industry of AGLS has the unique characteristics of asset-light enterprises,and the goodwill generated by its M&A has great uncertainty,so the analysis of this case has certain representativeness.In this article,through the specific data simulation system amortization method and impairment and amortization method under the follow-up measurement of EGLS goodwill,and comparative analysis of the three methods from multiple angles,through the specific data directly reflect the advantages and disadvantages of the three follow-up measurement methods.Aiming at Internet media enterprises,this article proposes to replace the impairment test method with systematic amortization method,which provides a new direction for further regulating the healthy operation of the capital market.