Research On The Risk Prevention Of Goodwill Impairment Of GEM Listed Companies

Since 2014,driven by the development needs of enterprises and favorable external policy environment,the number and transaction amount of M & A in China’s A-share market have increased greatly.However,due to high premium,high performance commitment and other reasons,many enterprises have accumulated a lot of goodwill.By the end of 2019,the goodwill scale of A-share market has reached1.26 trillion.In the past two years,with the approach of performance commitment period in the previous round of M & a boom and the overall economic downturn and other factors,goodwill explosion events frequently appear in A-share market.As a gathering place of asset light and high-tech companies,GEM listed companies rely more on the extension of M & A.However,due to the inaccurate valuation of the underlying assets,false high performance commitment,blind acquisition and other reasons,there is a greater risk of goodwill impairment.Different from other market sectors,most of the GEM listed companies have the characteristics of private,small and medium-sized.Once a huge amount of goodwill impairment event occurs,it will have a greater impact on them.In 2019,the proportion of goodwill impairment of GEM listed companies in their net profit is 92.05%,which is far higher than 1.75% of the main board and 34.94% of the SME board.As a listed company on GEM,Jinke culture constantly completes its transformation from a traditional chemical enterprise to a mobile Internet culture enterprise through merger and acquisition activities.In a short period of five years,Jinke culture has accumulated as much as 6.261 billion yuan of goodwill,and made a one-time provision for goodwill impairment of 2.6 billion yuan at the end of 2019,which is typical in the GEM market.Therefore,this paper chooses Jinke culture as a case company,and the analysis process is as follows:Firstly,this paper reviews the main merger and acquisition events on the road of Jinke culture transformation,combs the generation process of its high goodwill,and analyzes the impact of huge goodwill impairment on Jinke culture’s profitability and solvency.Secondly,it analyzes the causes of the huge goodwill impairment of Jinke culture from the following aspects: the inaccurate evaluation value of the underlying assets,the high performance commitment,the difficulties in the production and operation of the underlying enterprises,and the motivation of earnings management.Finally,the paper analyzes the effectiveness of the existing preventive measures for goodwill impairment risk of Jinke culture,such as setting performance commitment compensation clause,setting asset impairment compensation clause,setting performance award clause,using share based payment,etc.,and finds that the existing preventive measures have little effect on making up for the loss caused by huge business reputation impairment.Therefore,this paper puts forward some suggestions to improve the preventive measures from the following aspects: reasonable evaluation of the value of the target company,setting reasonable performance commitment indicators,enhancing the sustainable operation ability of the target enterprise,implementing step-by-step merger and acquisition,introducing contingent consideration payment method,and improving the company’s internal control.It also summarizes the inspiration of the huge goodwill impairment event of Jinke culture from three stages: before,during and after.Hope to be able to Jinke culture and more GEM listed companies to provide reference for the prevention of goodwill impairment risk.