Research On Excess Goodwill And Its Impairment Of Wanda Film

Merger and acquisition has been a favorable way for enterprises to expand scale or to achieve a rapid transformation.Especially since 2014,with the introduce of policies to encourage M & A activities and promote the development of cultural industry,the transactions in the media industry have increased rapidly.High premium M & A forms high amount of goodwill.Enormous goodwill often contains excess goodwill that is divorced from its essence,which intensifies the risk of goodwill impairment.When the management uses goodwill impairment for earnings management,the risk will be further amplified.Relatively concentrated goodwill impairment has occurred in the industry since 2018,which has not only greatly affected the performance of enterprises,but also damaged the interests of investors,causing strong concern.Based on the above background,focusing on the excess goodwill and its impairment of listed companies,this paper selects the typical case of Wanda film and gradually analyzes the causes of excess goodwill,the causes of goodwill impairment and the problems existing in the process.The study found that:(1)due to the excessive optimism of the management,insufficient identification and recognition of intangible assets,unreasonable performance commitments and other reasons,Wanda film’s high premium transactions formed excess goodwill,which increased the burden of the enterprise,also the risk of stock price collapse,becoming the direct source of goodwill impairment.(2)On the one hand,the slowdown of macroeconomic and the industry development,the failure to realize the expected synergy are important reasons for the goodwill impairmen.However,the earnings management behavior has become the decisive factor of goodwill impairment: in order to maintain the stock price,reputation and salary,the management used the discretion provided by the impairment method to avoid goodwill impairment in the early stage,resulting in the concentrated outbreak of impairment risk in 2019;In 2020,in order to convey a positive signal about future performance,Wanda film continued to impair goodwill in a large way,giving goodwill a "Big bath".(3)Wanda film’s disclosure of goodwill information is a mere formality,which is suspected of cooperating with earnings management.It is difficult to judge the rationality of goodwill recognition and impairment as the useful information available to statement users is very limited.In view of the above reasons,this paper tries to provide several general suggestions to prevent the risk.(1)In order to restrain excess goodwill and manipulation in its impairment,the improvement of governance and internal control of listed companies and the effective use of expert experience,the improvement of accounting standards on the measurement of management discretion,and the improvement of accounting environment is necessary.(2)Introduce clearer,stricter and more detailed requirements,and enhance the quality of goodwill accounting information disclosure.(3)Small and medium-sized investors should make efforts to understand the risks hind in goodwill;listed companies,analysts and regulators should also pay more attention to the goodwill risk to promote the protection of small and medium-sized investorsThe value of this paper lies in: first,distinguished from previous empirical research which usually use big data,this paper discusses the "contribution" of excess goodwill and earnings management to goodwill impairment through a typical specific case,analyzes existing problems,tries to supplement the existing results to a certain extent.Second,in view of the existing goodwill issues of Wanda film,this paper provided some improvement ideas for interested parties to prevent the risk of goodwill impairment.