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An MA boom that has cooked up risks on corporate balance sheets
By Nicholas KORDOWSKY, Head of Non Financial Research, Fixed Income at Aberdeen Standard Investments
What is goodwill? In the accounting sense, it’s an intangible asset that arises as a result of mergers and acquisitions (MA). Essentially, goodwill is the difference between the price paid for a company and its book value. It is recorded on the buyer’s balance sheet, and its value must be tested each year and adjusted accordingly. Any change results in a write-down of this value, which is recorded as an impairment – effectively, a loss.
We think that the potential for significant goodwill impairments needs more attention from investors. Why? Well, in recent...
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