A Study Of Corporate Merger Goodwill From The Perspective Of Earnings Management

In recent years,M&A has become an effective means for enterprises to break through the bottleneck period of development by virtue of scale effect,resource sharing and other advantages.However,in the process of merger and reorganization,the listed companies failed to fully recognize and evaluate the value of intangible assets owned by the acquiree,and the third-party evaluation institutions failed to fully perform their duties and duties,which inevitably brought negative effects on themselves.The case company in this paper,SS Company,failed to fully recognize the value of the target company at the beginning of the merger and acquisition period,and failed to properly estimate the future profitability of the target company,forming a high premium consolidated goodwill,thus facing greater financial and operational risks.The operation of the case enterprise has also sounded an alarm bell for the practitioners and even the theorists.How to analyze and discuss the goodwill of business combination based on earnings management has become the cause and reason for the author to explore and study.Due to the unfavorable implementation of merger and reorganization,SS Company appeared its first loss after listing.Based on this,from the perspective of earnings management,it began to study the formation of goodwill,goodwill impairment and negative effects of SS Company.Firstly,based on the existing data and theories,this paper objectively describes and analyzes the current situation of goodwill impairment and mergers and acquisitions in China;Secondly,we reviewed the process of the merger and acquisition of Y Company by SS Company,analyzed the problems in the merger and acquisition,and made a statistical analysis of the financial data of SS Company in recent years.It was found that SS Company implemented earnings management by controlling the amount and time node of goodwill impairment provision to achieve the company’s performance objectives;Finally,by studying the reaction of the regulatory authorities to the behavior of SS Company and the adverse impact on the company itself,the third party institutions,the small and medium-sized shareholders investors and other related parties,this paper puts forward policy recommendations on the prudent investment behavior of enterprises after the formation of a huge amount of goodwill and the inhibition of enterprises’ use of goodwill impairment for earnings management.This case study concludes that the one of the triggers for the company to implement earnings management is the high premium goodwill generated by mergers and acquisitions.The acquirer and the acquiree cannot reasonably estimate the market prospect of the target company when signing the agreement,which may have a negative impact on the profitability of the acquirer in the later period,and then cause the volatility of the acquirer’s share price and financing difficulties.At the same time,because of the information asymmetry between the minority shareholders and the internal management,the management will not be easily identified when implementing earnings management by controlling the time and amount of goodwill impairment,which is bound to bring incalculable losses to investors.In order to ensure the healthy development of the enterprise and the M&A market,maintain the fairness and justice of the market,and at the same time,the regulatory authorities and the third party institutions should assume their due responsibilities,study and put forward suggestions from the perspective of all parties:the M&A party should make due and detailed investigations before the M&A,and fully obtain the internal and external data of the target company to improve the accuracy of its value evaluation;At the same time,the acquirer improved the internal control system in the follow-up operation and management,and improved the professional ethics of the management;The Accounting Standards Committee further improved the provisions on the follow-up measurement of goodwill;Third party audit and evaluation institutions should improve their professional competence and professional ethics;Investors should make rational analysis to avoid losses due to blind investment.The innovation of this paper is to use actual cases,agent theory and information asymmetry theory to explore the relationship between goodwill and subsequent measurement of case companies and earnings management,and pay attention to the management behavior and stock price changes.Based on theory and combined with practice,we have learned and put forward general suggestions,providing reference for future research.