Study Shows Goodwill Impairments at European Companies Fell in 2016

By Nina Trentmann Features Dow Jones Newswires

Goodwill impairments at European companies listed in the Stoxx Europe 600 dropped in 2016 from the year before, according to a study by Duff & Phelps, indicating an improvement in the quality of deals, and the European economy at large.

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In 2016 goodwill impairments fell to 28.2 billion euros ($33.5 billion) from EUR37.1 billion in 2015, the study found, with European companies recording 121 impairments in 2016 compared with 146 impairments the previous year. Strong mergers-and-acquisitions activity led to EUR229 billion of goodwill being added to balance sheets of Euro Stoxx 600 companies last year.

"European companies have been doing more, but better deals," said Mike Weaver, managing director at Duff & Phelps. "This is why goodwill has gone up and impairments went down."

The numbers also suggest a strengthening of the economy, he added.

Large impairments recognized by Vodafone Group PLC (VOD.LN), HSBC Holdings PLC (HSBC) and Pearson PLC (PSO) have made the U.K. the country with the highest number of impairments, according to Duff & Phelps.

Impairments at British companies in the Stoxx Europe 600 increased two-fold from EUR7.7 billion in 2015 to EUR13.7 billion in 2016.

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A weaker British economy could result in fewer deals and higher impairment charges in 2017, Mr. Weaver said.

"At the moment, deal flow in the U.K. is still very strong. But, with the uncertainty around Brexit. this could weaken," he added.

Write to Nina Trentmann at nina.trentmann@wsj.com

(END) Dow Jones Newswires

December 21, 2017 08:59 ET (13:59 GMT)