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

2016 Goodwill Impairments Cut in Half to $29 Billion from $57 Billion in 2015

Results Include a 60% Decline in Energy Industry Impairments

NEW YORK--()--Duff & Phelps, the premier global valuation and corporate finance advisor, today announced the release of its 2017 U.S. Goodwill Impairment Study. This marks the ninth consecutive year that Duff & Phelps has prepared and issued a comprehensive Goodwill Impairment Study in partnership with the Financial Executives Research Foundation (FERF).

“The decrease in goodwill impairments in 2016 correlates with general trends in the financial markets. There was a marked change in investor sentiment towards the end of 2016, which was accompanied by a rally in equity markets to record highs”

The 2017 Study examined general and industry goodwill impairment (GWI) trends through December 2016 for over 8,400 U.S. publicly-traded companies, and reported results from an annual survey of Financial Executive International (FEI) members from both privately-owned and publicly-traded companies.

2017 Study Highlights:

  • U.S. publicly-traded companies recorded $29 billion in goodwill impairment in 2016 – half of the $57 billion in impairments recorded during 2015.
  • Consistent with this decline, the number of impairment events decreased from 350 in 2015 to 288 in 2016, while the average GWI per event declined by nearly 40%.
  • Nearly $280 billion of goodwill was added to U.S. companies’ balance sheets during 2016, the second highest level since 2008, reflecting a robust year for M&A.
  • From an industry perspective, highlights include:
    • Aggregate GWI amounts decreased in nine out of the ten industries analyzed – Healthcare being the only exception.
    • Despite being the hardest hit industry for three consecutive years, Energy had the most notable reduction in GWI in 2016 – dropping by approximately 60% compared to 2015, in both the amount and number of impairment events, reflecting a significant recovery in oil prices during the year. Nevertheless, four of the top ten largest impairment events of 2016 were in Energy.
    • Information Technology and Industrials also experienced significant decreases in the amount of GWI, with reported impairment dropping by 68% and 42%, respectively.

2017 FEI Member Survey Highlights:

  • Among publicly-traded company respondents, 52% reported that they use the optional qualitative goodwill impairment test (“Step 0”), a decline from 59% in 2015, while private company use fell from 50% to 45%. These results suggest that the use of Step 0 may be stabilizing, with about 50% of all respondents applying the qualitative test.
  • FASB simplified the goodwill impairment test in January of 2017, by eliminating “Step 2” of the test. Half of the respondents have not yet assessed the impact of this change ahead of the mandatory effective date, and of those who have, 70% expect the impact to be minimal with respect to frequency and magnitude of impairments.

“The decrease in goodwill impairments in 2016 correlates with general trends in the financial markets. There was a marked change in investor sentiment towards the end of 2016, which was accompanied by a rally in equity markets to record highs,” said Greg Franceschi, Duff & Phelps managing director and co-chairman of the AICPA Goodwill Impairment Task Force.

Duff & Phelps’ companion study focusing on goodwill impairments in the European market for calendar 2016 will be released in the coming weeks. For more information on Duff & Phelps’ Goodwill Impairment Studies and financial reporting valuation capabilities, please visit www.duffandphelps.com/GWIstudies.

About Duff & Phelps

Duff & Phelps is the premier global valuation and corporate finance advisor with expertise in complex valuation, disputes and investigations, M&A, real estate, 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, capital raising and secondary market advisory 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 Canada are provided by Duff & Phelps Securities Canada Ltd., a registered Exempt Market Dealer. M&A advisory, capital raising and secondary market services in the United Kingdom and across Europe are provided by Duff & Phelps Securities Ltd. (DPSL), which is authorized and regulated by the Financial Conduct Authority. In Germany, M&A advisory and capital raising services are also provided by Duff & Phelps GmbH, which is a Tied Agent of DPSL. Valuation Advisory Services in India are provided by Duff & Phelps India Private Limited under a category 1 merchant banker license issued by the Securities and Exchange Board of India.

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