Extended M & A,Performance Commitment And Goodwill Impairment Risk

As the Chinese government introduced policies to encourage mergers and acquisitions,China’s listed companies set off a lot of mergers and acquisitions.In recent years,the number of enterprises in China ’s M & A had shown an accelerated growth trend.In this economic situation,there are many problems about merger and acquisition.The most typical is the large amount of goodwill recognized by enterprises in mergers and acquisitions.The confirmation of large amount of goodwill is usually accompanied by performance commitments.In recent years,there have been more and more cases where the performance commitments of the merged and acquired companies fail to fulfill performance commitment.The income realized by the company deviates from expectations,and the company will accrue impairment on goodwill in the future.The higher the amount of goodwill,the greater the potential risk of impairment.Based on this background,this article selects Tianshen Entertainment in 2018 as an example to explore the reasons for the impairment of goodwill.The article mainly uses literature analysis,case analysis and descriptive statistical analysis First of all,the article analyzes the accounting standards of merger,the relationship between goodwill impairment risk,performance commitment and earnings management.Secondly,using the descriptive statistical analysis method to analyze the goodwill impairment of listed companies in China.We can find that unfulfilled performance commitments are likely to cause goodwill impairment.Then,using case analysis method to analyze the formation of Tianshen Entertainment ’s goodwill.The motivation of impairment of goodwill lies in the following four aspects.Firstly,the asset valuation methods lacks rationality.Secondly,to promote stock price rise and reduce holdings.Thirdly,the risk of high performance commitments is insufficient.And lastly,there is motivation for earnings management.In addition,this paper analyzes the impact of huge amount of goodwill on Tianshen Entertainment’s.There are four suggestions for the current problems of goodwill.Firstly,improving the basis of the income method evaluation to make the evaluation more scientific and reasonable.Secondly,considering whether the performance commitment is reasonable.Thirdly,improving the goodwill Accounting treatment to reduce earnings management.And lastly,strengthening the company’s internal management and supervision of third parties.