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The accounting treatment of goodwill in the enterprise merger and acquisition

Author: ZhangJianShe From: www.yourpaper.net Posted: 2010-06-05 22:23:54 Read:
Keywords:   the goodwill of fair value accounting treatment; enterprise M & A
Abstract: of M & A in the goodwill of merger and acquisition of enterprises, how to confirm the goodwill and accounting treatment follow-up is an important part of goodwill, also on the M & A enterprise later period operating results and financial position of influence.Discussion on the impairment testing method through that process and post process of goodwill, trying to learn how to merger goodwill.
Enterprise merger and acquisition is one of the important aspects have a significant impact on the economic environment, is the impact of financial accounting.From the United States of America enterprise merger and acquisition process can be seen, merger and acquisition and the formation of modern financial accounting is accompanying.When the merger and acquisition of Chinese enterprises are facing a new stage of development, the Ministry of Finance on 2006 promulgated the new accounting standards formulated 38, make the financial processing method of enterprises in China largely in line with international standards, the implementation of the new standards will also to our country enterprise especially listed companies, financial enterprise value evaluation the report data, the disposal of assets, tax planning has a significant impact, but also affect the way I m & motivation, risk, method selection, after the disposal of assets and financial processing.This paper specifically aimed at enterprise merger and acquisition of the accounting treatment of goodwill to discuss.
A description of the , goodwill
According to the provisions of the "International Accounting Standards No. twenty-second -- enterprise merger": "the purchase cost more than buying party in the trading day on the purchase of the identifiable assets and liabilities at fair value of equity part, should be used as the goodwill and recognised as an asset.Purchase goodwill represents the purchaser expected future economic benefits and costs.Future economic benefits may be formed due to the synergistic effects of purchase of the identifiable assets, may also be formed in some assets, these assets in a single account, does not meet the recognised in the financial statements of the standards, but the buyer at the time of purchase is ready for the expenditure."The United States of America "provisions of the enterprise merger and acquisition criteria:" intangible assets "total cost is greater than the enterprise is purchased by the identifiable assets minus liabilities balance the difference should be recognized as an asset.The assets are often referred to as the goodwill."
Goodwill is enterprise mergers and acquisitions, balance costs and enterprise is higher than the fair value of net assets, is owned by the excess profitability in the future for the enterprise a kind of special economic resource.It is because of the geographical position is superior, good reputation and won the trust of customers, or because the organization of enterprise properly, production efficiency is high, the intangible value or as a result of advanced technology, mastered the production know-how, and the formation of.This is expected to bring intangible value than the industry average profit level of the excess profit for the enterprise.Its value only when the enterprise as a whole to reflect, to accounting according to the total amount, usually this kind of value is not included in the account of the enterprise, only the enterprise mergers and acquisitions to calculate this value.
two, the measurement of goodwill and impairment to determine
(a) to determine the fair value of goodwill with
Despite the goodwill can not exist independent of the whole asset, but has its intrinsic value, need to determine the fair value of goodwill with, first to determine the fair value of the assets of the group of goodwill; goodwill is second to the fair value of the assets of the asset group group is allocated to all assets and liabilities; finally, the difference is the fair value of goodwill and allocation asset group to assets within the group of assets and liabilities value, which contains the fair value of goodwill.
"StatementsofFinancialAccountingStandards142" (abbreviation {SFAS142}) are clearly defined, the fair value of the reporting unit is refers to the current transaction is voluntary in familiar with the parties, to buy or sell the amount of overall unit used in the report.Usually the market quotation on active market is the best evidence of fair value, if available, should be used as the basis of fair value measurement; if not, the estimated amount of the fair value should be based on the best information available on similar assets and liabilities, such as price, other valuation techniques to make the results.Under normal circumstances, the NPV method is the best method can obtain the fair value, can be used to estimate such as asset group combination of the fair value of assets and liabilities.
In the calculation to determine the fair value of the reporting unit of goodwill, then it needs to be fair value of goodwill is allocated to report a report unit unit of all assets and liabilities, so as to determine the fair value of goodwill with.Therefore, ~SFAS142} pointed out, for the purpose of measuring goodwill impairment losses, if at the same time to meet the above conditions, the assets and liabilities should be included in the report of the goodwill unit: (1) the assets will be used in reporting unit operations, the liabilities and reporting unit business activities; (2) to determine the fair value the report unit, will take into account the assets or liabilities.In addition, {SFAS142}~ pointed out that the method of determining the fair value of goodwill, containing the same method to determine the amount of goodwill in Enterprise Merger: merger of enterprises in the purchase, paid the purchase price difference exceeds the share of enterprises in the purchase of enterprise net assets fair value, is the value of goodwill; goodwill impairment test at, fair report unit over allocation to report unit all the assets and liabilities of the difference in value, which contains the fair value of goodwill.Notable is, in the allocation process, only the enterprise in order to test goodwill impairment objective and implementation, enterprises should not be as a result of the allocation process and write-ups or write-downs already confirmed assets and liabilities, also should not be confirmed the previous period have not been confirmed by the sharing of intangible assets.
Taking into account the goodwill cannot be independent of other assets in combination with characteristics of the cash flow, and other assets or merge together in the characteristics of generating cash flow, the United States of America's financial accounting standards board (FASB) consists of two steps: measurement of goodwill impairment losses approach fully reflects the goodwill to bring economic benefits to the enterprise mode.In addition, the FASB and the international accounting standards board (IASB) with goodwill over book value of the contents of the difference between the fair value of goodwill impairment loss measurement.
(two) goodwill impairment losses determined
Since the goodwill and the whole enterprise, cannot exist alone, also can't and the identifiable assets sold separately etc..In order to determine whether the impairment of goodwill, by using the FASB approach, given signs of goodwill is impaired, is feasible.
Before the measurement of fair value to confirm the goodwill goodwill impairment losses condition, requires that goodwill is impaired.If no impairment of goodwill, do not need to confirm the impairment loss of goodwill; goodwill impairment losses if, is necessary to confirm the impairment loss of goodwill.That goodwill is impaired, the need to identify whether there is any sign of possible impairment of goodwill.If there are signs of possible impairment, on the need for impairment testing of goodwill; if there is no sign of possible impairment, need not be tested for impairment of goodwill.
Considering the cost and benefit principle, enterprises generally do not need every time in the preparation of the financial statements of each asset impairment test, only there are signs that the asset may be impaired test is impaired, or that the asset is impaired.
Goodwill because of its own particularity, can not be independent of those from other assets or the cash flow.Therefore, an impairment loss in respect of goodwill test, usually should be based on cash-generating asset or asset group.For specific identification of goodwill is impaired, "sFAs142" rules, goodwill is not amortized, but shall be tested for impairment in the report unit level.Usually should be tested for impairment in the fiscal year basis, any specific time in the year between, as long as the impairment test is carried out in the same time of year.In certain circumstances, can also be tested for impairment of goodwill in the related factors, such as legal factors or business environment has a material adverse change, regulatory authorities to take significant adverse action, unforeseen competition etc..
In addition, because of the characteristics of goodwill and indivisible, goodwill impairment losses, then the value of goodwill pick-up, in most cases it is impossible to distinguish between the value of the goodwill is the result of increased, and influencing factors of goodwill impairment of revolving.At present, the FASB approach is to prohibit reversal confirmed goodwill impairment losses.China's "Enterprise Accounting Standards No. eighth impairment of assets" also stipulates: "goodwill impairment losses are confirmed, in subsequent accounting period shall not be back."
(three) measurement of goodwill impairment losses
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