Goodwill Impairment After M&A : Acquisition-Level Evidence on Compliance With SFAS 142

To provide a fuller picture of compliance with SFAS 142, we hand-collect data to track 893 large acquisitions. Our model, which links impairments to post-acquisition performance declines and acquisition-year attributes, identifies 349 acquisitions as likely to impair. We expand compliance to include both acquisitions that impair when first predicted to impair as well as those that wait for a year or two, and impair (elect not to impair) if the initial performance decline is permanent (temporary). Moving to this broader view increases compliance rates from 15 to 65 percent of acquisitions predicted to impair. Our model should be useful to future research as it clarifies the role of hand-collection, market to book ratios, segment level data, and volatility. We offer descriptive evidence on impairment patterns, and find only limited evidence of acquirers taking big baths in the year of impairment. Overall, we find high levels of compliance and little opportunism