Goodwill Impairment Drops to Five Year Low
Public companies reported the lowest levels of goodwill impairment in 2013 since the financial crisis touched off a downward spiral in corporate values beginning in 2008.
In its annual study of goodwill impairment, valuation firm Duff & Phelps founds public companies recorded write-downs totaling $21 billion in 2013, down nearly 60 percent from the $51 billion reported in 2012 and a fraction of the $260 billion reported in 2008. The average impairment amount across more than 5,100 companies included in the study fell to $108 million in 2013, down 50 percent from the prior year but still higher than the 2009 average amount of $86 million.
The results suggest corporate values are generally holding their own, says Greg Franceschi, managing director of the firm. “This is directly related to the performance in the market,” he says. “The market caps of publicly traded entities were on the upswing from prior years, so this is that built-in cushion that these companies have.” Goodwill is an intangible asset on corporate balance sheets that arises after an acquisition, representing the premium paid to acquire a company beyond the fair value of its collective assets. Investors like to track it as an indicator of whether a particular acquisition has panned out or gone sour. Read more on Compliance Week.