OUR THOUGHTS ON:

Goodwill Impairment Trends

Business Advisors

By Jennifer Doering

The 2013 U.S. Goodwill Impairment Study was recently released by Duff & Phelps and the Financial Executives Research Foundation (FERF).

The study was prepared for two purposes:

  • To convey trends in goodwill and goodwill impairment in U.S. companies.
  • To publish the 2013 results of the annual goodwill survey of FEI members, which will be covered in a future Insight.

The study used financial information for calendar year December 31, 2012 and included more than 5,100 companies, representing more than 93% of market capitalization for U.S.-based, U.S.-traded companies.  Some of the more interesting results from the study are as follows:

Goodwill impairment ranged from $26 billion to $30 billion in calendar years 2009 through 2011.

U.S. companies recorded $51 billion of goodwill impairment in calendar year 2012, a 76% increase over the $29 billion recorded in the previous year.  However, nearly half of the goodwill impairment recorded in 2012 was attributable to just three impairment events.

Goodwill impairment in information technology, industrials and healthcare industries accounted for roughly two-thirds of the total goodwill impairment recorded.

The study noted that the total goodwill impairment in 2012 does not include a $27 billion goodwill impairment recorded by General Motors (GM) because it did not meet the study criteria.  Goodwill impairment included in the study must be initially recorded with economic substance and result from deterioration in economic conditions or operating performance.  (GM performed its annual goodwill impairment testing with no indication of impairment.  The $27 billion impairment recorded was initiated by an event-driven impairment test in the fourth quarter, triggered by GM’s reversal of a deferred tax asset valuation allowance.)

In 2012, an additional $211 billion of goodwill was recorded on balance sheets as a result of mergers and acquisitions.  Fewer deals were transacted in 2012, but total deal value in 2012 was greater than in 2011.  In 2011, 1,694 deals were closed, for a total deal value of $415 billion.  In 2012, 1,525 deals were closed, for a total deal value of $540 billion.

Please contact Joel Rosenthal at 412-697-5387 or jrosenthal@schneiderdowns.com or Tom Claassen at 412-697-5330 or tclaassen@schneiderdowns.com of the Schneider Downs Business Advisory Group to further discuss how we can assist you with your goodwill analysis needs.

© 2014 Schneider Downs. All rights reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

 

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© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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