Research On The Goodwill Impairment Of Mobile Game Industry

At present,mergers and acquisitions have become a normal method for the development and expansion of enterprises.While goodwill is a difficult problem in mergers and it also accounts for a large proportion of intangible assets.It has always been a matter of debate between the accounting theoretical circle and practical circle.With the continuous deepening of China’s economic development,China’s M&A market is increasingly active,and the value of goodwill often accounts for a large proportion of the overall enterprise value.Especially in recent years,with the rapid development of the mobile game industry,high premium mergers and acquisitions are common,thus forming a large amount of goodwill as well as a high risk of goodwill impairment.But there are still many problems and difficulties in the actual implementation of the impairment test method stipulated in the standards.Many companies take advantage of huge goodwill impairments to write off profits or never make any impairment,making goodwill one of the "black swans" in China’s capital markets.Among them,the collective impairment provision of goodwill of mobile game industry listed companies in 2018 not only resulted in a sharp decline in profits,but also caused the company’s assets to evaporate.Therefore,it is of great practical and theoretical significance to study the issue of goodwill impairment of mobile game enterprises after mergers and acquisitions.In this paper,the definition and economic essence of goodwill,the initial recognition and measurement of goodwill,the subsequent measurement of goodwill,the presentation and disclosure of goodwill are explained by consulting goodwill literature and domestic and foreign standards.This paper first introduces the mobile game industry’ characteristics,the status and causes of goodwill impairment,and then introduces the case of Z company’s acquisition of W company and impairment process.Under the guidance of the existing goodwill-related accounting standards,combined with practical cases and references,this paper analyzes the causes of goodwill impairment and existing problems,and puts forward suggestions for standardizing the accounting treatment of goodwill,so as to provide financial statement users with clearer and more valuable accounting information and reduce information asymmetry.The full text is mainly divided into six parts: the first part is an introduction that mainly explains the research background and significance,the research content and methods;The second part is the literature review of goodwill and theoretical basis,which mainly introduces the relevant theoretical basis of goodwill,domestic and foreign standards and a domestic and foreign literature review on goodwill accounting;The third part,mobile game industry status analysis,introduces the basic information of mobile game industry and the overview of goodwill and goodwill impairment in the industry;Part four is a brief introduction of the case,which mainly introduces the background of the companies on both sides of the merger and acquisition,and reviews the target company’s valuation,the merger and acquisition process and the performance commitment terms;Case analysis,the fifth part,first introduces the accounting treatment process of the initial recognition of goodwill and subsequent impairment of goodwill by the listed company,and analyzes the market response to the impairment of goodwill,and then further analyzes the causes of the case company’s goodwill impairment,and finally analyzes the rationality of the goodwill impairment treatment of the case company and re-evaluates the amount of goodwill impairment;In the sixth part,conclusions and suggestions are made based on theoretical research and case analysis.Based on the above research,this paper draws two conclusions: First,at the enterprise level: the reasons for the impairment of goodwill in this case include the overvalued enterprise value and merger price to form a huge amount of goodwill,the possibility of earnings management by the management,the improper response to industry and market risks,and the unsatisfactory corporate integration after the merger;After the disclosure of goodwill impairment information of Z company,the market responded quickly,and investors were pessimistic about it,thus bringinglosses to the equity investment of shareholders;In this case,the revenue growth rate and discount rate of W company’s goodwill impairment test are unreasonable,while the amount of goodwill impairment recalculated and verified by the author will be significantly reduced.Second,at the industry level: recently,mobile game industry develops rapidly and mergers and acquisitions frequently,presenting the industry characteristics of high goodwill value and high goodwill impairment risk;The disadvantages of the income method will drive up the valuation and goodwill of enterprises in mobile game industry;The impairment of huge goodwill will disturb the order of the industry’s capital market,and thus the standards and norms need to be improved.