Goodwill Impairment Study In Asset-light M&A Transactions

With the development of Chinese economy and society,enterprise mergers and acquisitions are becoming more and more common,and different types of enterprises have also joined the team of enterprise mergers and acquisitions in order to create new interest growth points in the new economic situation.The prevalence of the Internet industry has made many companies that have not been involved in the industry before choose to carry out mergers and acquisitions,and then step into the Internet industry to share risks,create benefits,and achieve strategic transformation of enterprises.However,as a typical representative of asset-light enterprises,Internet enterprises have obvious asset-light characteristics,which are often accompanied by higher premiums in mergers and acquisitions,which in turn generate higher value goodwill.As an important part of modern enterprise assets,the impairment of goodwill can only be assessed by relying on annual impairment tests under existing standards,which are often accompanied by uncertainty.In 2018,there are many listed companies in China’s capital market with huge impairment of goodwill,and the impact of this phenomenon on the capital market is serious,so it is necessary to provide some suggestions for related enterprises when similar mergers and acquisitions happens through case studies.Taking the issue of goodwill as the main line,this paper analyzes the formation and impairment of goodwill in the case of B-RAY’s acquisition of Dream Works and Roaming Valley game enterprises,identifies the main problems in the generation and impairment of its goodwill,analyzes the main reasons for its huge impairment and its impact,and puts forward corresponding suggestions to help enterprises better understand the goodwill issues related to the acquisition of asset-light enterprises,so as to promote the healthier and sustainable development of corresponding mergers and acquisitions.This paper mainly uses three methods to study the case: the case analysis method,comparative analysis method and event research method,and the whole text consists of six parts,except for the introduction,literature review and conclusion part,the remaining three parts introduce the relevant concepts and theoretical basis and the introduction and analysis of the case respectively.The first part of the thesis introduces the concepts and theoretical basis of mergers and acquisitions,the definition and recognition measurement of goodwill,the definition and development status of assetlight enterprises,as well as the analysis and conclusions of researchers in related fields,defines the relevant concepts,and also lays the theoretical groundwork for subsequent analysis.The second part of the thesis introduces the case of B-RAY,including the description of the two parties to the merger and acquisition,and the two mergers and acquisitions of B-RAY in 2009 and 2013 are detailed on the theme of goodwill.The third part of the thesis is the case analysis of B-RAY,starting from the case situation in the second part,also taking goodwill as the main line,introducing the initial recognition and subsequent measurement of the specific goodwill generated by the two mergers and acquisitions,and then analyzing the background of the goodwill,the reasons for the merger and the impact of the goodwill impairment,and finally,starting from the analysis conclusion.The reasons for the huge goodwill impairment of BRAY were analyzed in this part.Through the analysis of the goodwill problem of B-RAY,it is concluded that mergers and acquisitions in asset-light industries generate a large amount of goodwill,and the huge impairment of goodwill has a serious impact,and put forward five practical suggestions.First,for the acquisition of asset-light enterprises,the valuation method and goodwill impairment test method should be improved accordingly;Second,businesses can disclose more fully in the accounting statements about Goodwill issues;In addition,when acquiring asset-light enterprises,a VAM agreement should be reasonably formulated according to the specific situation of the acquired party;In addition,strengthen supervision and auditing;Finally,the development strategy of enterprises should be optimized,M&A capabilities should be improved,M&A target enterprises should be reasonably selected,and goodwill impairment risks should be controlled within an acceptable range.