A study by KPMG found that goodwill impairments more than doubled during 2008 from 2007 levels at a cross-section of U.S.-based public companies.
The trend could have implications for companies that have made acquisitions and have goodwill on their balance sheets. The KPMG study analyzed goodwill impairment for more than 1,600 public companies from January 2005 to December 2008 and found that goodwill impairment charges at the companies rose to $340 billion in 2008, more than double the $143 billion recorded in 2007 and nearly four times the $87 billion reported in 2006.
With the current economic downturn and continued pressure in financial markets, goodwill impairment impacted more companies in 2008, said KPMG valuation services partner Seth Palatnik.
The study found that, in the past year, the hardest-hit industries in dollar terms were banks, which accounted for almost 23 percent of the total goodwill impairment charges, followed by materials, energy, media, and technology hardware and equipment. But the study also noted that other segments of the economy, including pharmaceuticals and food and beverages, took significant goodwill write-downs in 2008.
The median goodwill impairment charge by industry continued to rise through 2008. For example, the banks in the study recorded a median charge of approximately $411 million in 2008, up from just over $49 million a year earlier. Similarly, the median impairment charge for the materials industry rose to $394 million from $30 million in 2007.
Through 2008, the study found that the semiconductor and semiconductor equipment (31 percent), technology hardware and equipment (31 percent), media (30 percent), consumer durables and apparel (27 percent) and diversified financials (25 percent) industries had the greatest number of companies within the industry sample population that recorded goodwill impairment.
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