Research On Goodwill Impairment In Chinese Enterprise Mergers And Acquisition

The huge impairment of goodwill is one of the hottest topics in China’s capital market in the past two years.Many listed companies have to swallow the "storm" of goodwill,which seriously affects the current net profit.The causes of this phenomenon can largely be traced back to a series of operations in previous years,during which there was a massive merger and acquisition expansion between 2015 and 2017.From 2015 to 2017,the Internet,software and other asset-light industries were popular concepts.In the m&a valuation,due to the high technical content of asset-light,the method of income was generally adopted for the valuation,which also led to the valuation price being several times higher than the fair value of identifiable net assets,with a surprising premium rate.Goodwill companies huge write-downs are usually in a business combination not under the same control pay a higher premium,the premium confirmed in the current accounting standards for enterprises as consolidated financial statements in a non-current assets,when performance commitment to expire,or haven’t expire but because industry changes,the change of product,the party was the future could bring cash flow and evaluation predict the future cash flow of the serious differences,this also leads to the acquired party after the revaluation to calculate the recoverable amount,heavily than predicted period,sharp goodwill impairment is a foregone conclusion is inevitable.The author based on the predecessors’ research of goodwill theory,selected the 2018 annual report of goodwill "thunder" blasting web celebrity Zeus entertainment for a case study of listed companies,combing the explosion "thunder" Zeus entertainment in all six subsidiaries goodwill impairment to formed a complete process,analyze the causes of its annual goodwill impairment of 4.06 billion yuan,the purpose is to view the lines,reflect the current problems existing in the process of goodwill and room for improvement.Through the study of the case of divine entertainment,the following five Revelations can be summarized.First,the factors affecting the transaction price.The huge impairment of goodwill is closely related to the transaction price,which is influenced by many factors.Second,tien’s high share price at the time of the acquisition has given it an incentive to acquire assets at a high premium.Third,the fundamental cause of goodwill impairment of Zeus entertainment is attributed to the changes in the industry and product changes.Fourthly,there is a serious lack of information on the impairment of goodwill of tiandas entertainment,which is short of substantive disclosure.Fifth,Zeus entertainment in the current one-time plan to withdraw a huge amount of goodwill,earnings management to take a big bath,which is related to China’s special delisting system.Based on the enlightenment from the case of Zeus entertainment in this paper,this paper puts forward the following five Suggestions from the perspectives of the acquirer,the acquirer and the supervisor.First,due diligence in the purchase of assets should not only verify the authenticity of relevant information,but also evaluate its future core profitability.Second,step by step mergers and acquisitions can be used to prevent the generation of large goodwill.Third,vigilance and high-priced shares for trading.Fourth,explore the system amortization method and impairment test method in parallel.Fifth,Improve the related system related to goodwill.