Research On The Cause And Effect Of Large Amount Impairment Of Goodwill In SZ Company’s Mergers And Acquisitions

With the relaxation of supervision and policy support for mergers and acquisitions of listed companies in China in 2014,the extensive M&A activities of enterprises are in full swing.At the same time,high premium M&A events in the capital market continue to rise,and as a result,high goodwill has accumulated,burying the risk of goodwill impairment and thunderstorm.In 2018,China’s A-share market experienced a collective goodwill thunderstorm,with the goodwill impairment amount reaching a peak of 151.3 billion yuan.By 2020,the goodwill impairment amount will still be 85 billion yuan."The explosion of goodwill impairment can directly lead to sudden changes in the company’s performance,net profit losses,and a significant decline in the company’s stock price".The goodwill thunderstorm event not only brings serious negative impacts to listed companies,but also brings huge losses to investors.At the same time,it also has a significant impact on the capital market.In this context,this thesis starts with case analysis,selects SZ listed company as the object of Case study,specifically analyzes the causes,impacts and existing problems of the company’s goodwill thunderstorm,and then puts forward suggestions to solve the problem of goodwill impairment.The reason why SZ Company is selected as the Case study object in this thesis is that the company has withdrawn 6.1 billion yuan of goodwill impairment in 2020,and the amount of goodwill impairment in the A-share market is high,and the auditor cannot judge the rationality of one subsidiary’s full withdrawal of goodwill impairment in the current year.Based on the issues with the rationality of goodwill impairment in SZ Company,this thesis focuses on analyzing the true reasons for the occurrence of this large-scale goodwill impairment event and the impact of the goodwill impairment event on SZ Company.The study found that the main reasons for the significant impairment of goodwill of SZ Company this time are the following four factors.Firstly,the overly optimistic and accommodating evaluation methods of the evaluation agencies and the "asset light" characteristics of the target company have boosted the valuation of mergers and acquisitions,thereby accumulating high goodwill and burying the risk of subsequent goodwill impairment from the source.Secondly,the direct reason for the impairment of goodwill is that the defects in the underlying company’s business model have reduced revenue and the adjustment of the company’s management strategy has increased current expenses,leading to a decline in the underlying company’s performance and signs of goodwill impairment.Thirdly,the impairment of goodwill this time is the management’s earnings management behavior,manifested as SZ Company delaying the provision of goodwill impairment in 2019 to provide a buffer time for major shareholders to reduce their holdings and cash out,and then concentrating on the provision of large impairment in 2020 for performance "bathing".Fourthly,the flexibility of goodwill standards provides management with discretion in the impairment testing of goodwill,making the impairment testing of goodwill more subjective,which is reflected in two aspects: the impairment testing of goodwill has not been evaluated by an independent third-party institution,and the disclosure of goodwill impairment information is insufficient.This large goodwill impairment event led to a significant loss in SZ Company’s performance,a stock price crash,and serious damage to the rights and interests of small and medium-sized shareholders,which had a very negative impact on the company.Based on the above analysis,the thesis proposes suggestions to regulate the confusion of goodwill impairment from four aspects.Firstly,control the generation of goodwill foam from the source level.Secondly,accelerate the improvement of goodwill impairment accounting standards and information disclosure system.Thirdly,strengthen the internal and external governance supervision of goodwill impairment.Fourthly,small and medium-sized investors themselves should strengthen the identification of goodwill impairment risks.Through the research of the above content,the thesis can provide some reference and reference value for analyzing the reasons for the occurrence of goodwill thunderstorms in the capital market,their impact,the problems in goodwill impairment,and how to effectively solve the problem of goodwill impairment.