Duff & Phelps Publishes Inaugural European Goodwill Impairment Study

Majority of survey respondents expect future goodwill impairment testing to change as a result of IFRS 13

Duff & Phelps Corporation, a leading independent financial advisory and investment banking firm, today announced the release of its inaugural  2013 European Goodwill Impairment Study, prepared in partnership with Mergermarket. The 2013 Study focused on financial data from 2010-2012 for companies in the STOXX® Europe 600 Index, which includes large, mid and small capitalization companies across 18 countries of the European region. Duff & Phelps will host a webcast on December 18 to review the findings of the study.

Key highlights include the following:

• For 2012, total goodwill impairment for companies in the STOXX® Europe 600 Index of €65 billion represented a decrease of approximately 15% from the €77 billion recorded in 2011.

• From an industry perspective, Telecommunications Services recorded the largest goodwill impairment charges in 2012, with aggregate impairment of €23.4 billion. Financial and Materials followed with aggregate goodwill impairment of €15.2 billion and €14.2 billion, respectively. These European industry dynamics provide a contrast with findings from Duff & Phelps recently released U.S. Goodwill Impairment Study, which found 67% of the goodwill impairment recorded in 2012 was booked by Information Technology, Industrials, and Healthcare.

• Geographically, companies based in the United Kingdom recorded the largest goodwill impairments in 2012.

• Approximately 40% of European companies responding to Duff & Phelps Survey recognized goodwill impairment in 2012. Companies that did so cited ‘overall market conditions’ and ‘general industry downturns’ as the most common reasons for the impairments. Cash-generating unit specific factors cited as a less significant issue.

The 2013 Study also includes information obtained from informal discussions with a sample of European investors and analysts. In general, these stakeholders highlighted the importance of transparent goodwill disclosures, with particular emphasis on the sufficiency of impairment methodology and assumptions, as well as related communication to the market.

“Against the backdrop of ESMA’s regulatory vigilance and investor demands for increased financial transparency, Duff & Phelps examined goodwill impairment trends across Europe,” said Yann Magnan, Duff & Phelps managing director and Valuation Advisory Services leader for Europe. “Marked swings in aggregate impairment over the last three years have been heavily influenced by the impact of the global financial crisis and subsequent beginning of a recovery. Going forward, more than two-thirds of survey respondents that test goodwill for impairment on a fair value basis expect their impairment testing to change as a result of the introduction of IFRS 13 this year.”

Mr. Magnan concluded, “We look forward to monitoring the impairment landscape under this evolving regulatory regime, and to communicating our findings to the market.”

Duff & Phelps companion study focused on Goodwill Impairment in the U.S. Market was released on November 12.  A companion study on Goodwill Impairments in the Canadian market will be released this week. All of these studies can be found at  www.duffandphelps.com.

About Duff & Phelps 

As a leading global financial advisory and investment banking firm, Duff & Phelps leverages analytical skills, market expertise and independence to help clients make sound decisions. The firm advises clients in the areas of valuation, M&A and transactions, restructuring, alternative assets, disputes and taxation – with more than 1,000 employees serving clients from offices in North America, Europe and Asia. For more information, visit  www.duffandphelps.com.

Investment banking services in the United States are provided by Duff & Phelps Securities, LLC. Member FINRA/SIPC. Transaction opinions are provided by Duff & Phelps, LLC. M&A advisory and capital raising services in the United Kingdom and Germany are provided by Duff & Phelps Securities Ltd., which is authorised and regulated by the Financial Conduct Authority.

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