A Study On Goodwill Impairment In Corporate Mergers And Acquisitions

China’s M&A and restructuring market activity has continued to rise since 2014,and various industries have been attracted to M&A and restructuring by various favorable policies.While M&A restructuring provides potential for growth for publicly traded companies,it also carries significant risks.The phenomena of "three highs"(high commitment,high valuation,and high premium)has accelerated,and the high valuation under the income method has brought a huge amount of goodwill to the enterprise,while also laying the hidden danger of goodwill impairment,once a listed company’s performance fails,it must incur a significant amount of goodwill impairment.which directly affects the net profit of the enterprise and leads to a huge loss.As cases of large goodwill impairment have emerged,they have aroused the interest of investors and regulators alike.thus,exposing a series of problems with goodwill impairment.High premium mergers and acquisitions result in high initial recognition of corporate goodwill,laying a hidden danger for later goodwill impairment.In the subsequent measurement of goodwill,many companies choose to delay the impairment of goodwill due to surplus management motives,which,coupled with incomplete disclosure of goodwill impairment information,makes it impossible for external information users to receive accurate and reliable financial data.In this paper,the issue of goodwill impairment in M&A is studied in the context of the case of acquisition of Xingke Electronics by Yinxi Technology.First,the literature on goodwill and goodwill impairment is reviewed to provide a theoretical basis for the subsequent research and analysis.Then,the case is presented with the development of both parties,the motivation process of M&A,and the formation and impairment of goodwill.Secondly,the problems in the goodwill impairment process of Silver Jubilee Technology are analyzed using the case study method.The main problems are that the initial recognition amount is too high leading to a high risk of subsequent impairment,the impairment provision in the subsequent measurement process is unreasonable,there is a delay in the provision and a large one-time goodwill impairment provision;the information disclosure related to the goodwill impairment test is not perfect,and investors are unable to receive accurate and trustworthy financial information about the company.Then an in-depth analysis of the causes of goodwill impairment is conducted.The primary cause of goodwill impairment,according to the report,is excessive goodwill resulting from high premium mergers and acquisitions,in this case due to the existence of selfinterest purpose of both parties to the transaction,When mergers and acquisitions first begin,the signing of a high performance promise causes the company to recognize a significant level of goodwill.As part of the ensuing goodwill measurement process,the major shareholder,in order to shed equity gains,first delayed the impairment of goodwill and then took a large one-time goodwill impairment to take a big bath,resulting in a huge loss for Yinxi Technology in 2018,seriously damaging the interests of small and medium shareholders.In addition,the failure to meet performance commitments is the direct cause of the large goodwill impairment that Silver Jubilee Technology has taken,and it is also because the failure to meet performance commitments has allowed Silver Jubilee Technology to choose to delay the goodwill impairment and fail to disclose goodwill impairment information as required.Finally,relevant suggestions are made to the problems in the process of goodwill impairment of Yinxi Technology.First,the initial value of goodwill should be reasonably recognized;second,the impairment test method of goodwill should be improved,and the parallel method of amortization and impairment can be adopted;third,the information disclosure related to goodwill should be refined,and the penalty for non-disclosure and incomplete disclosure should be strengthened.