2012 Goodwill Impairment Study: Canadian Edition

Duff & Phelps and the Canadian Financial Executives Research Foundation (CFERF) have released the inaugural 2012 Goodwill Impairment Study: Canadian Edition (the “Study”).

The Study addresses the following key topics:

  • The initial impact of transition to IFRS on goodwill impairments, plus insights into what the impact may be going forward.
  • Trends in aggregate goodwill impaired, and total goodwill impaired by industry over the last 5 years (2007-2011).
  • The impact of goodwill impairment on stock prices.
  • The results of a FEI member survey and Research Forum of senior Canadian financial executives exploring the goodwill impairment process and expectations of future impairments.

Study Highlights

  • IFRS adoption prompted an incremental $7.1 billion in goodwill impairments recognized in 2010, relative to the originally reported $1.3 billion. Of the total incremental impairments, $5.5 billion was recognized as a one-time adjustment to retained earnings (RE), while $1.6 billion was recognized as an additional 2010 income statement (IS) charge.
  • The aggregate amount of goodwill impaired in calendar year 2011 by Canadian publicly traded companies was $11.0 billion, $8.9 billion (or 81%) of which was recognized by three major companies; therefore the ongoing impact of applying IAS 36 Impairment of Assets is yet to be determined.
  • In general, companies that did not recognize a goodwill impairment over the 2012 study’s 2007–2011 time horizon outperformed those that recorded a goodwill impairment as well as the S&P/TSX Composite Index.
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