Tue, Oct 14, 2014

Duff & Phelps Publishes Sixth Annual U.S. Goodwill Impairment Study

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

Duff & Phelps, the premier global valuation and corporate finance advisor, today announced the release of the  2014 U.S. Goodwill Impairment Study. This marks the sixth consecutive year that Duff & Phelps has prepared and issued a comprehensive Goodwill Impairment Study in partnership with Financial Executives Research Foundation.   

The 2014 Study was compiled based on financial information reported for the 2009-2013 calendar years by over 5,100 companies, representing 92% of market capitalization for U.S. based publicly-traded companies as of December 31, 2013. Duff & Phelps will host a webcast at 12:00 p.m. EDT today to review the findings of the Study. 

Key highlights from the 2014 Study include:

  • U.S. companies recorded $21 billion of goodwill impairment, the lowest aggregate impairment amount since 2008 and a 59% decrease from the $51 billion reported in 2012.
  • The average impairment amount was $108 million in 2013. This represents a 50% decline from the prior year average and approaches the low of $86 million in 2009.
  • The aggregate goodwill impairment amount was no longer dominated by the top three impairment events for the year. The concentration of goodwill impairments attributable to the three largest impairment events declined from 47% in 2012 to 22% in 2013.
  • 52% of the goodwill impairments were booked by three industries: Materials, Healthcare and Industrials.  In contrast, last year’s Report found that 67% of the goodwill impairment was concentrated in the Information Technology, Industrials and Healthcare sectors.
  • Industrials had the largest percentage of companies with impaired goodwill (7%), followed by Information Technology and Consumer Discretionary (both at 6%).
  • Of the companies carrying goodwill, 8.6% recognized goodwill impairment in 2013, a decrease from 10.5% in 2012.
  • Use of Step 0 by public company respondents to an annual survey of Financial Executives International (FEI) members increased to 43% from the 29% reported in the prior year’s survey. This was consistent with a Duff & Phelps independent Step 0 Study of U.S. public companies, which found an increase in usage from 33% in 2012 to 41% in 2013.  

“This year’s study found that aggregate impairment is at its lowest level since 2008, reflecting a stronger economy and higher market valuations overall,” said Greg Franceschi, Duff & Phelps managing director and Co-Chairman of the AICPA Impairment Task Force.  “While the FASB continues to deliberate over the most appropriate model for goodwill accounting, it is notable that the use of the qualitative assessment option has increased over the prior year and that the majority of survey respondents that have applied Step 0 believe it has met its stated objective of reducing compliance costs while continuing to provide important and relevant information to users of financial statements.”

Now in its sixth year of publication, the U.S. Goodwill Impairment Study continues to examine general and industry goodwill impairment trends, as well as report the results of its annual survey of FEI members, who represent both privately-owned and publicly-traded companies. New regulatory developments impacting how goodwill impairment testing is performed also continue to be highlighted.
Duff & Phelps’ companion studies focusing on goodwill impairments in the Canadian and European markets will be released in the coming weeks. For more information on Duff & Phelps’ Goodwill Impairment Studies and financial reporting capabilities, please visit www.kroll.com/GWIstudies.

About Duff & Phelps
Duff & Phelps is the premier global valuation and corporate finance advisor with expertise in complex valuation, dispute consulting, M&A and restructuring. The firm’s more than 1,000 employees serve a diverse range of clients from offices in North America, Europe and Asia. For more information, visit www.duffandphelps.com.
M&A advisory and capital raising services in the United States are provided by Duff & Phelps Securities, LLC. Member FINRA/SIPC. Pagemill Partners is a Division of Duff & Phelps Securities, 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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