– Energy sector recorded greatest total amount of impairments –
Duff & Phelps, the premier global valuation and corporate finance advisor, today announced the release of its 2015 U.S. Goodwill Impairment (GWI) Study. This marks the seventh consecutive year that Duff & Phelps has prepared and issued a comprehensive Goodwill Impairment Study in partnership with the Financial Executives Research Foundation (FERF).
The 2015 Study continues to examine general and industry goodwill impairment trends through December 2014 for over 8,700 companies, as well as report the results of its annual survey of Financial Executive International (FEI) members, who represent both privately-owned and publicly-traded companies.
Key highlights from the 2015 Study include:
- U.S. companies recorded $26 billion of goodwill impairment, representing an 18 percent increase from $22 billion in 2013. The number of goodwill impairment events increased by 24 percent to 341 for the same period.
- The average impairment amount was $75 million in 2014, a 5 percent decline from the prior year average of $79 million. Eighty-six percent of the survey respondents did not recognize impairment in 2014, which was the lowest level in the past three years.
- The Energy industry recorded the highest amount of goodwill impairment in 2014, nearly tripling from $2.1 billion in the prior year to $5.8 billion. Two of the top five largest impairment events of 2014 were in Energy, and the Exploration & Production sector recorded two-thirds of reported Energy goodwill impairment.
- Consumer Staples, Financials, Information Technology and Industrials all recorded an increase in goodwill impairment, while the Healthcare, Consumer Discretionary, Telecom, Materials and Utilities industries all recorded declines.
- Use of the qualitative goodwill impairment test known as Step 0 by public company survey respondents indicates record use, increasing to 54 percent from the 43 percent reported in 2014. Private companies also continued to embrace the Step 0 test, with 40 percent applying it, nearly doubling the 22 percent usage rate in the 2013 Survey. Moreover, two-thirds of all respondents believe Step 0 meets its stated objective of reducing costs.
“The increased 2014 aggregate impairment amount was consistent with macroeconomic trends. While the U.S. economy continued to improve in 2014, plunging commodity prices in the latter half of the year affected certain industries disproportionately,” said Greg Franceschi, Duff & Phelps managing director and co-chairman of the AICPA Impairment Task Force. “With 2015 M&A activity up significantly over 2014 levels, the highest since 2007, goodwill resulting from acquisitions will remain an important asset class for investors to monitor,” added Franceschi.
Duff & Phelps’ companion study focusing on goodwill impairment in the European market will be released in the coming weeks. For more information on Duff & Phelps’ Goodwill Impairment Studies and financial reporting valuation 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 and legal management consulting, M&A, restructuring, and compliance and regulatory consulting. The firm’s more than 2,000 employees serve a diverse range of clients from offices around the world. 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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