Subsequent Measurement Of Goodwill And Accounting Information Quality

On January 4,2019,the Accounting Standards Committee of the Ministry of Finance announced the opinions of the advisory committee members on the issue of “goodwill and its impairment” in the Accounting Standards Advisory Forum.The advisory committee members generally agreed with the amortization model for subsequent measurement of goodwill.Subsequently,large sums of listed companies of China reported losses in the newsletters released,and most of the losses were caused by impairment of goodwill.In theory,the impairment model of goodwill matches the economic substance of related asset operations after the merger and acquisition.However,after the " Grey Rhino Incident " caused by impairment of goodwill,many people in the theoretical and practical circles questioned the use of the impairment method as the sole subsequent measurement model of goodwill.The subsequent empirical research results show that goodwill in general does not have a long-term positive impact on corporate profitability,which is contrary to the definition of the meaning of goodwill based on the "ternary theory".However,the latest discussion draft of the International Accounting Standards Committee in March 2020 clearly stated that it refused to return to the amortization model,which showed a completely different attitude from the information published in 2019.In order to understand whether changes in accounting policies on the subsequent measurement of goodwill will certainly provide higher-quality accounting information and what problems exist in the impairment model,and how to solve them,this article takes Huayi Brothers’ acquisition of Dongyang Meila as the case to be analyzed.This article believes that problems exist in the process of performing impairment model on goodwill of Huayi Brothers(1)After Huayi Brothers acquired Dongyang Merah in 2015,there was no timely and full provision of goodwill reduction even in 2018.(2)There is a problem of abnormally high goodwill in the initial measurement.After adopting the amortization model to retrospectively adjust the goodwill formed by the acquisition of Dongyang Meila.And after using amortization model to make sure weather the purely change of measurement can enhance the quality of accounting information,it suddenly occurred to us that his method was not found to improve the quality of accounting information.Based on this,this article believes that policy recommendations should be focused on the problems that exist in the implementation of the impairment provision method.Changing the subsequent measurement of goodwill has a limited impact on the quality of accounting information.In order to solve the problems emerged in the case,this article believes that people could try the following method to come to their point:(1)Improve the information disclosure requirements.In general,the content and form of information disclosure are strictly controlled to reduce the earnings management.(2)The formation process of the valuation should be disclosed,in this way investors could judge weather the transaction consideration is too high or not.(3)Properly design the anti-gambling clauses.On the one hand,the anti-gambling clauses can predict the risk of impairment of goodwill.On the other hand,the anti-gambling clauses can make up for the loss of investors in a failed merger to a certain extent.