United States
Click the 'X' in the top right corner to close this window.
PricewaterhouseCoopers TS insights – goodwill impairment implications in the current market turmoil
Goodwill impairment announcements have had minimal impact on share price
More goodwill impairment announcements likely around the corner
“With further stock price declines in the beginning of 2009 and continued uncertainty in the markets, more goodwill impairment announcements are likely around the corner,” warns Alberto Dent, a partner with PricewaterhouseCoopers' Transaction Services practice. “However, management teams that are anxious about announcing a goodwill impairment in today’s market often overlook one key item – recent goodwill impairment announcements typically have had a muted effect on stock prices by the time of the announcement.”
PwC’s review of daily and monthly historical trading prices for companies announcing recent impairment compared with performance of the S&P 500, revealed that there has been little impact to share price for companies as of the goodwill impairment announcement date. PwC found that for many of the companies announcing recent impairments, most of the decrease in stock price occurred on or before the October/November 2008 timeframe, and not necessarily when the impairment was announced.
Index versus S&P 500─Daily
To illustrate using the week ending on January 30, 2009, 30 companies announced impairments representing approximately $25 billion in charges. The stock price performance of these 30 companies has effectively mirrored the S&P 500 since the beginning of 2009 through March 20, 2009 (see chart below).
Source: FactSet
The report concluded that recent market turmoil, coupled with the complexities of goodwill impairment testing, will require companies to continually monitor potential triggering events. “Although recent goodwill impairment announcements typically have produced only muted effects on stock prices, reviewing public information regarding impairment charges can help management consider the impact an impairment charge would have on its company,” said Dent. “This, in turn, can enable management to articulate a broader perspective of their business -- both internally and to the public markets.”
For a copy of PricewaterhouseCoopers’ TS Insights – Goodwill Impairment Implications in the Current Market Turmoil report, visit www.pwc.com/ustransactionservices .
About Transaction Services
The PricewaterhouseCoopers' Transaction Services practice provides due diligence for M&A transactions, along with advice on M&A strategy, divestitures, valuations, accounting, financial reporting, and capital raising. With approximately 1,000 deal professionals in 16 cities in the U.S., experienced teams are deployed with deep industry and local market knowledge, and technical experience tailored to each client's situation. The Transaction Services team can be involved from strategy to post-deal integration and employ an integrated business approach to uncover the realities of a deal. The field-proven, globally consistent, controlled deal process helps clients minimize their risks, progress with the right deals, and capture value both at the deal table and after the deal closes.
For more information, visit www.pwc.com/ustransactionservices .
About PricewaterhouseCoopers
PricewaterhouseCoopers ( www.pwc.com ) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 155,000 people in 153 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
"PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
© 2009 PricewaterhouseCoopers LLP. All rights reserved
# # #
Additional media contacts:
Jennifer Gery-Egan
Brainerd Communicators, Inc.
Tel: +1 (212) 986 6667
Email to a colleague
Print-friendly version