Tue, Nov 12, 2013

Duff & Phelps Publishes Fifth Annual Goodwill Impairment Study

Study Results Show Highest Levels of U.S. Goodwill Impairment Recorded Since 2008

Duff & Phelps Corporation, a leading independent financial advisory and investment banking firm, today announced the release of the 2013 U.S. Goodwill Impairment Study, prepared in partnership with the Financial Executives Research Foundation(FERF). The 2013 Study was compiled utilizing financial information through December 31, 2012 for over 5,100 companies, representing in excess of 93 percent of market capitalization for U.S. publicly-traded companies. Duff & Phelps will host a webcast at noon EST today to review the findings of the study.

Key highlights from the study include the following:

  • U.S. companies recorded $51 billion of goodwill impairment in 2012, a 76% increase from the $29 billion reported in 2011. This marks the highest impairment level since those reported as a result of the financial crisis in 2008.
  • 67 percent of the goodwill impairment recorded in 2012 was booked by just three industries: Information Technology, Industrials, and Healthcare.
  • Goodwill impairments were heavily concentrated, with 47 percent attributable to the three largest impairment events reported in 2012.
  • While overall deal volume declined in 2012, there was a 30 percent increase in deal value, leading to $211 billion in additional goodwill recorded on balance sheets.

The 2013 Study also provides summary highlights of the AICPA Accounting and Valuation Guide-Testing Goodwill for Impairment, which is now available and can be obtained at www.cpa2biz.com. The new guide provides preparers, auditors and valuation specialists with a comprehensive resource to address goodwill impairment issues. 

“A primary goal of the goodwill impairment study is to provide an at-a-glance tool that allows readers to quickly benchmark where  their company falls in relation to industry peers and overall market trends,” said Greg Franceschi, Duff & Phelps managing director and Co-Chairman of the AICPA Impairment Task Force that developed the new best practices guide. “In this year’s survey of financial executives we asked a number of questions about the optional qualitative goodwill impairment test (Step 0) that was introduced in 2011. Counter to industry predictions, the majority of our clients continue to perform the quantitative test, and this was supported by our survey results which found over 70 percent of companies are opting to apply the traditional quantitative Step 1 impairment test.”


Additional Highlights of the 2013 U.S. Goodwill Impairment Study Include:

  • 43 percent of all U.S. companies currently carry some amount of goodwill on their balance sheet; however that number has declined from 48 percent in 2010. Of companies carrying goodwill, 10.5 percent recorded a goodwill impairment event in 2012, a nominal increase from 10.2 percent in 2011.
  • Nearly 60 percent of public and private companies surveyed cited factors specific to reporting units as the reason for their recent goodwill impairment, as opposed to overall market or general industry downturns.
  • Industry Insights:
  • Information Technology jumped from fourth place in 2011 to first place in 2012 with the highest amount of goodwill impairment ($22 billion, or, 43 percent of aggregate impairment), replacing Financials, which held the largest amount of goodwill impairment in each of the three previous years.
  • The Industrial sector had the largest percentage of companies with impaired goodwill (eight percent) followed by Information Technology and Consumer Staples (both at seven percent).
  • Although goodwill intensity (goodwill as a percentage of total assets) across all industries has held fairly stable over the years at approximately six percent, certain industries have shown a recent upward trend, most notably Healthcare with 24 percent in 2012. Contributing factors in general for high goodwill intensity in Healthcare include ongoing transaction activity as well as high growth expectations from future technologies. Additional sectors showing notable goodwill intensity growth include Industrials, Telecommunications Services and Materials.

Now in its fifth year of publication, the 2013 U.S. Goodwill Impairment Study continues to explore the goodwill landscape in the United States by focusing on general and industry trends of goodwill and goodwill impairment of U.S. companies; highlighting new regulatory developments impacting how the goodwill impairment test is performed; and reporting the results of its annual survey of Financial Executives International (FEI) members, representing both privately-owned and publicly-traded companies.

Duff & Phelps’ companion studies focused on Goodwill Impairment in the Canadian and European markets will be released in the coming weeks.

About Duff & Phelps

As a leading global financial advisory and investment banking firm, Duff & Phelps leverages analytical skills, market expertise and independence to help clients make sound decisions. The firm advises clients in the areas of valuation, M&A and transactions, restructuring, alternative assets, disputes and taxation – with more than 1,000 employees serving clients from offices in North America, Europe and Asia. For more information, visit www.duffandphelps.com.

Investment banking services in the United States are provided by Duff & Phelps Securities, LLC. Member FINRA/SIPC. Transaction opinions are provided by Duff & Phelps, LLC. M&A advisory and capital raising services in the United Kingdom and Germany are provided by Duff & Phelps Securities Ltd., which is authorized and regulated by the Financial Conduct Authority.

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