Impairment Risk and Prevention Research of Goodwill in Corporate Mergers and Acquisitions

Abstract

Since the year 2000, there has been a significant outbreak of impairment of goodwill in listed companies, leading to serious negative impacts on their operations and the real economy. Therefore, this paper employs a case study approach and combines the case of Broad-Ocean Motor's acquisition of Shanghai Edrive in 2016 to explore the reasons for the impairment risk of goodwill in individual cases of listed companies, and to provide corresponding strategies for preventing such impairment. Due to issues such as Broad-Ocean Motor's high valuation and high premium acquisitions, unreasonable valuation of goodwill, Shanghai Edrive 's underperformance in meeting performance commitments, and changes in industry policies, substantial impairment of goodwill occurred. Measures such as determining reasonable acquisition transaction prices, enhancing corporate merger and integration systems, improving disclosure mechanisms for goodwill-related information, increasing external market supervision, and strengthening penalties for violations can be taken to prevent the risk of impairment of goodwill in mergers and acquisitions.