The company Grant Thornton has studied how listed companies handled the impairment of goodwill and intangible assets in Sweden, and compared this with the United States to see how we stand against them.
The results show that Swedish listed companies have significantly lower write-downs than the listed companies in the U.S. and that the Swedish companies 'goodwill today on average is 30 percent of companies' total equity. This means that there is a wide variation in the IFRS rules interpretation and observance.
In total, the 259 Swedish listed companies had goodwill of 613 billion SEK which represents a share of nearly thirty percent of their total equity. If we would add the remaining intangible assets (334 billion) the share amounts to 43 percent of the shareholders' own equity.
Significant differences between Sweden and the U.S.
Only 37 of the Swedish companies wrote down goodwill in 2008 and then only for a total value equal to 1.5 percent of goodwill. In the U.S. write-downs represented 30 percent of the total goodwill for the same period.
Only a few of the Swedish companies note in their consolidated financial statements that the write-downs are due to the financial crisis.
-We can ascertain that the write-down tests, as described in the companies´ financial statements, rarely gives an adequate description of the valuation assumptions that the managements have made and how current market conditions may affect the tested units says Björn Gauffin at Grand Thornton’s corporate finance department.
It is mainly companies’ sensitivity analysis that gives us this image. One can for example have shown how a change in the margins or growth rate affects impairment, but to have missed posting this really represents a concern in this particular activity.
All companies listed on the Stockholm Stock Exchange (OMX Nordic Exchange Stockholm) on March 18th, 2009 have been investigated.
Cecilia Helland