Research On The Goodwill Impairment Performance Of W Company

With the increasing competition in the capital market,many enterprises take the way of merger and acquisition because of their lack of development power,in order to realize the transformation and upgrading of enterprises.As the film and television industry,which is strongly supported by various national policies,closely follows the footsteps of mergers and acquisitions,and becomes a typical industry with frequent premium mergers and acquisitions.High premium mergers and acquisitions rapidly increase enterprise value,but also bring high goodwill this invisible land mine.The reason why enterprises are willing to pay high merger costs is that the acquired enterprises make promises with high performance returns.However,if the promises fail to be fulfilled,the acquirer will withdraw goodwill impairment from accounting to reevaluate the enterprise value,which will cause a series of problems.In this context,the study of the impact of goodwill impairment on corporate performance will provide reference for enterprises in the same industry to deal with similar situations.This paper takes W Company,a representative company in the film and television industry with frequent impairment of goodwill,as a case enterprise.Based on the theory of information asymmetry,principal-agent theory and earnings management theory,this paper uses the event study method and other methods to deeply study the causes of goodwill impairment and analyze the shortcomings of enterprises in dealing with goodwill problems and the role of goodwill impairment behavior in enterprise performance.First of all,this paper takes the industry background as the introduction,mainly introduces the development overview and impairment status of the current film and television industry.Secondly,this paper uses the case study method to clarify W Company’s major mergers and acquisitions in recent years,goodwill recognition and impairment process,and analyzes the causes of the enterprise’s large amount of goodwill impairment.In the part of reason analysis,it is in-depth analysis from internal and external perspectives.The external reasons are mainly two points,namely,flexibility rules bring manipulation space to enterprises and are affected by the epidemic environment;the internal factors are mainly enterprises’ overevaluation of enterprise value,unfulfilled performance commitments and the management’s earnings motivation.Thirdly,this paper compares the impact on the short-term market before and after two goodwill impairments through the event study method.At the same time,financial index analysis and EVA value added method are used to explore the effect of goodwill impairment on enterprise financial performance and economic value.Finally,this paper summarizes the whole paper and draws the conclusion of the case analysis of W Company’s goodwill impairment,specifically: Two huge goodwill impairments have brought serious consequences to enterprises,reducing their solvency,weakening their profitability,and inhibiting the turnover of their operating capacity.Although high goodwill increases the total assets of enterprises,it also inhibits the development of enterprises to some extent.Goodwill impairments will send negative signals to the market,leading to the loss of investors’ confidence in enterprises.And that has an impact on stock prices.The synergistic effect of these series of mergers and acquisitions of W company is not ideal.Its asset scale keeps growing,but after the occurrence of goodwill impairment,the added value of the company’s economy declines and remains in negative value for several consecutive years,which shows the impact of goodwill impairment on the enterprise.From the case enterprises to the film and television industry,this paper summarizes the case enlightenment.First,the regulatory authorities should strictly supervise and control from the source,provide strong proof of the high performance commitment given by the acquired party,increase the control of information disclosure,expand the scope of accountability,and formulate relevant laws and regulations to enhance the credibility of evaluation.Second,M&A enterprises should improve the value evaluation system,treat performance commitments carefully,consider and improve compensation methods from multiple angles,pay attention to market macroeconomic policies in time,and dynamically track changes in market environment.Investors in the third market should carefully analyze enterprise activities,observe whether there is the possibility of impairment when investing in enterprises with high goodwill,and make investment after rational analysis and evaluation to safeguard their own interests.It is hoped that this paper can provide reference for enterprises to deal with goodwill issues in the future and enrich the research in the field of goodwill impairment.