Uncertainty in future cash flows used to value goodwill
First written in FY2021. 1 of 3 entries say "Worsened", first in FY2025. Latest entry: FY2026.
Mitsui Matsushima Holdings moved to the "Worse" side of this theme in 2025, 2 years after the typical company in this theme (2023).
The whole theme swung hardest in 2019: 5 of 13 companies on the "Worse" side.
2 other companies' latest entry also says "Materialised".
- FY2026MaterialisedAnnual report
「With respect to “Other” (Osaka City, Osaka Prefecture), the Company reduced the carrying amount of fixed assets, including goodwill related to its consolidated subsidiary システックキョーワ, to the recoverable amount because the originally anticipated earnings were no longer expected, and recognized an impairment loss on the goodwill during the current consolidated fiscal year.」
Regarding the risk associated with estimates of future cash flows used to value goodwill, an impairment loss of ¥687 million was actually recognized on goodwill related to システックキョーワ. - FY2025WorsenedAnnual report
「In valuing goodwill, the Group identifies indicators of goodwill impairment for each cash-generating unit, including goodwill, by examining the achievement of operating income and operating cash flow targets based on the business plans prepared at the time of acquisition for each target company, in accordance with accounting standards for impairment of fixed assets and other applicable standards. Goodwill at the end of the current consolidated fiscal year was ¥17,095 million.」
As goodwill increased to ¥17,095 million in line with the expansion of M&A activity, the Company continues to explicitly identify the risk of additional impairment arising from uncertainty in acquisition business plans and future cash flows. - FY2021First statedAnnual report
「If the estimates and assumptions described above require revision due to changes in uncertain future economic conditions or other factors, additional impairment losses (extraordinary losses) may arise in the consolidated financial statements for the following consolidated fiscal year or later periods.」
The Company newly states that the valuation of goodwill of ¥10,748 million involves uncertainty in the business plan prepared at the time of acquisition, market conditions and future cash flow assumptions, creating a risk of additional impairment.