Study On The Motives And Financial Consequences Of TC’s Huge Goodwill Impairment

In the context of economic globalization,cross-border mergers and acquisitions have gradually become an important way for Chinese enterprises to explore international markets and create new profit growth points.However,with the frequent occurrence of the "Chinese style premium" phenomenon,huge amounts of goodwill assets have accumulated in the capital market.2018 to 2019,hundreds of listed companies have suddenly experienced"goodwill explosions",which not only seriously damage the profit level of enterprises in the current period,but also This has not only seriously damaged the current profit level of the companies,but also caused adverse impact on the future development of the companies,which has aroused great concern from investors and regulatory authorities.Such phenomena are particularly prominent in the health care industry,which has seen a sharp rise in the scale of mergers and acquisitions in recent years,and it is therefore of great relevance to study the drivers of goodwill impairment and its financial consequences for health care companies.This case study is analysed on the basis that TC paid a high premium to acquire an overseas L company and one year later a large goodwill impairment occurred.Firstly,after analysing the basic situation of the M&A parties and the M&A transaction process,the recognition of goodwill and goodwill impairment is elaborated and the scale of goodwill impairment of TC Company is quantitatively defined according to the goodwill impairment status of the industry.The thesis then digs deeper into the motivations for goodwill impairment at TC from both internal and external perspectives.The thesis then uses traditional financial indicators,EVA analysis and Z-value model evaluation to examine the financial consequences of a large goodwill impairment on the company in terms of both benefits and risks.Finally,in conjunction with the above findings,recommendations are made to prevent and mitigate the risk of goodwill impairment in a targeted manner.Through the study of the case company,this thesis finds that the internal motivation for the huge goodwill impairment of TC Company comes from the pressure of impairment brought by high premium mergers and acquisitions and the management’s motivation of surplus management,while the external motivation is mainly due to the tightening of industry regulation which affects offline performance and the implementation of e-commerce law which leads to the limitation of sales channels.The huge goodwill impairment not only affects the profitability of the company and damages the interests of shareholders and investors,but also puts the company in a high financial risk situation.Therefore,based on the above analysis conclusion,this thesis,from the root cause of goodwill impairment,argues that enterprises should pay attention to market and policy guidance in a timely manner,and at the same time,they should select M&A targets prudently and optimize the evaluation process,so as to reduce the premium of M&A targets and avoid falling into financial difficulties after M&A,which brings goodwill impairment risk to enterprises;in addition,they should strengthen the construction of internal control system to reduce the phenomenon of management favoritism and fraud In addition,it is necessary to strengthen the internal control system to reduce the occurrence of management’s favoritism.After that,this thesis proposes corresponding risk management measures for the financial consequences of goodwill impairment.Finally,combined with the problems revealed by the huge goodwill impairment of TC,this thesis argues that the disclosure system of goodwill information should be standardized and suggests improvements to the current goodwill subsequent measurement model.