A Case Study Of Goodwill Impairment For Earnings Management By W Corporation

With the continued development of China’s economy,many companies are continuing to expand,while mergers and acquisitions and restructuring between companies are occurring in the context of an increasingly sophisticated capital market.As a result,goodwill impairment charges are not uncommon among listed companies in China,and there are many instances of large goodwill impairments.Most of these goodwill impairments are due to deterioration in operating conditions and are therefore justified in accordance with accounting standards for the purpose of improving their operating conditions,while some goodwill impairments are also made for the purpose of manipulating profits and may have a surplus management motive.As goodwill impairment has a complex mechanism of action on a company,and thus can have a certain impact on its operating performance,failure to dispose of goodwill impairment reasonably will have a serious negative impact on the company.How to effectively standardize the reasonableness of goodwill impairment charges for listed companies in China and reduce the possibility of surplus management in this way,so that the financial reports and company announcements issued by companies can be more reliable and deliver information that more truly reflects the company’s financial situation,thus effectively promoting the sound and orderly development of China’s market economy.This thesis firstly systematically reviews the relevant literature at home and abroad,on the basis of which a literature review is formed.At the same time,it takes Company W,a representative company in China’s media industry,as a case study,firstly to introduce its merger and acquisition situation,then to sort out the formation process of its large amount of goodwill,and at the same time to analyse its impairment status,and to explore the motives and means by which Company W used goodwill impairment for surplus management.Through the analysis,this thesis concludes that there is an obvious surplus management motive behind the huge goodwill impairment of Company W for two consecutive years in2019 and 2020.Therefore,after examining the case study of Company W’s use of goodwill impairment for surplus management,this thesis concludes that this behaviour has had some negative effects on the company’s development,Therefore,from the perspectives of enterprise,policy formulation and external supervision,this thesis puts forward some suggestions to help prevent the use of goodwill impairment to conduct earnings management.