Analysis Of The Motivation,behavior And Consequences Of Goodwill Impairment Under The Perspective Of Surplus Management

With the continuous development of enterprises,industrial expansion and M&A restructuring have turned into their main means to achieve greater development.In recent years,due to the high quality and rapid development of the national economy,M&A and restructuring activities of domestic listed companies have become increasingly frequent.However,the overvaluation of some subject companies has led to the possible formation of a large amount of goodwill impairment after the completion of acquisitions,which can cause the M&A companies to use such goodwill to implement surplus management,thus affecting the long-term healthy development of the companies.2019,Wanda Film made a huge provision for goodwill impairment,resulting in a huge loss,which triggered widespread concern and hot debate in the capital market.2020 On January 20,in response to Wanda Film’s disclosed "2019Annual Results Forecast",the Shenzhen Stock Exchange issued a concern letter,requesting it to answer questions about whether the goodwill impairment provision in2019 is reasonable,whether there is an unimpaired prior period provision and whether there is a reconciliation of profits.Based on the above research background,Wanda Film is used as the research object to explore and study the motives,behaviors and consequences of its goodwill impairment from the perspective of surplus management.First,we review the existing domestic and international literature,summarize the key conceptual theories,and analyze the current situation of M&A activities and goodwill impairment of domestic listed companies as a whole;second,we explain the formation of goodwill and the recognition of goodwill impairment of Wanda Film,and use empirical analysis to confirm the signs of surplus management in the goodwill impairment of Wanda Film using the modified Jones model.Finally,we analyze the consequences of this action in three aspects: market effect,regulatory effect,and financial effect,and find that this action will lead to negative market effect and will be concerned by the regulatory authorities.The analysis of financial indicators reveals that it may have a partial negative impact on the company’s operating conditions,which leads to recommendations to the relevant parties to prevent the occurrence of surplus management behavior as much as possible.The study concludes that there is a clear motivation for surplus management behind goodwill impairment,and that the root cause of goodwill impairment for surplus management is the high premium M&A behavior of companies,and the flexibility of accounting standards creates room for this behavior,which at the same time can have a negative impact on market conditions and company operations.In order to promote the healthy development of companies and the M&A market,the study recommends improvements from several perspectives: at the company development level,the accuracy of value assessment should be enhanced and internal controls should be strengthened;at the institutional level,the Accounting Standards Board should improve or optimize the goodwill impairment test methodology;at the investor level,investors should fully understand the risks and adopt rational investment strategies,etc.