A Case Study On The Prevention Of Goodwill Devaluation Based On Gambling Agreement

Since the development of China's capital market,goodwill has received unprecedented attention due to information released by the Ministry of Finance or amortized.The unprecedented high level of M&A activity led to the accumulation and growth of the goodwill of the capital market,and the risk of impairment of goodwill also increased.The frequent concern of the CSRC on the impairment of goodwill and the huge commercial goodwill generated by M&A activities have made the research significance of goodwill impairment become more prominent.Since the introduction of the gambling agreement in China in 2003,it has been mainly used in private equity and corporate mergers and acquisitions.It is an effective means to weaken the risk of mergers and acquisitions,but most of the use of M&A activities has failed.Therefore,how to correctly and rationally use the internal mechanism of the gambling agreement,recognize the advantages and disadvantages and risks of the gambling agreement,and maximize the role of the gambling agreement needs to be further explored.This paper introduces the case of TONZE's acquisition of Xintai Materials,exploring the role of the gambling agreement in the impairment of goodwill.Based on the relevant theories and research literature both here and abroad,and based on the background of this article's companies and the design of the gambling agreement.It studies the causes of the impairment of the goodwill,the role of gambling agreements in preventing the impairment of goodwill.The study found that the undervaluation of the underlying assets and the deterioration of the market environment are the main causes of the impairment of goodwill;There are four main effect on the protection of goodwill.The operational risks of the acquired parties during the performance commitment period are prevented,and the impairment of goodwill after the commitment period of the acquirer is prevented,the information asymmetry risk in cross-border mergers and acquisitions of thehigh premium valuation risk caused by the income method are the effectiveness of the gambling agreement in preventing the impairment of goodwill.In the view of above analysis,proposing the following suggestions: Before the signing of the gambling agreement,it is necessary to rationally select the purpose of merger and acquisition,and choose the M&A plan based on share-based payment;Design a reasonable performance commitment indicator in the signing of the gambling agreement,and involve the exercise of diversification standards;Strengthen the supervision of the acquiree after the signing of the gambling agreement,and set incentive terms to motivate the management of the acquirer.