BusinessCorporate FinanceCEOs ‘reluctant to write down goodwill’

CEOs 'reluctant to write down goodwill'

Chief executives reluctant to impair goodwill amid continuing economic uncertainty

GOODWILL IMPAIRMENT write-downs have hit a five-year low despite ongoing economic challenges, and CEOs might be behind this reluctance to send out negative messages.

A study by investment bank Houlihan Lokey shows just €14bn (£12bn) was booked as goodwill impairment last year, compared to €187bn between 2006 and 2010.

Goodwill is the value of a company over and above the net value of its assets, and might be marked down – or impaired – due to difficult market conditions or factors affecting a business’s commerciality.

Last year’s analysis also showed 22% of 600 companies examined showed high impairment risk, significantly more than the 7% seen in 2006.

Sandy Purcell, senior managing director and co-author of the study, said: “It’s interesting to note that impairments are at their lowest level in five years despite an overall downward movement in market capitalisation levels. It’s also apparent that the issue of whether or not to make goodwill write-downs is closely connected to the individual decisions of the chief executives, and these executives are not keen on communicating goodwill impairments during a time of increasing uncertainty, even if their market capitalisation is also in decline.”

Related Articles

The Practitioner: Financing landscape gloomy for small businesses

Business Regulation The Practitioner: Financing landscape gloomy for small businesses

12m The Practitioner
Helical Bar achieves £100m refinancing

Corporate Finance Helical Bar achieves £100m refinancing

4y Kevin Reed, Writer
Growth and financing easier for small business in 2014

Corporate Finance Growth and financing easier for small business in 2014

4y Cameron Roberts
FDs boost TMT start-ups' growth prospects

Corporate Finance FDs boost TMT start-ups' growth prospects

5y Kevin Reed, Writer
IASB changes overshadowed by break-away from FASB

Corporate Finance IASB changes overshadowed by break-away from FASB

5y Rachael Singh, Writer
Businesses look for alternatives to bank funding

Company News Businesses look for alternatives to bank funding

5y Kevin Reed, Writer
HMV issues going concern warning over covenants risk

Company News HMV issues going concern warning over covenants risk

5y Kevin Reed, Writer
SMEs' travails should prick the ears of practices

Business Regulation SMEs' travails should prick the ears of practices

5y Kevin Reed, Writer