Risks of Contingent Liabilities and Goodwill Impairment after M&A
First written in FY2018. 10 of 19 entries say "Materialised", first in FY2020-Q3. Latest entry: FY2026.
The whole theme swung hardest in 2024: 36 of 89 companies on the "Worse" side.
- FY2026WorsenedAnnual report
「In light of the expenses associated with goodwill amortization and other costs related to M&A, important future challenges include steadily increasing the earnings contribution of each company newly joining the group, continuing to improve the earnings structure of the core value segments, and further strengthening the group's overall management control system.」
New M&A increased the goodwill balance from ¥300 million in the previous fiscal year to ¥631 million, while goodwill amortization increased from ¥63 million to ¥88 million. Securing earnings contributions while managing post-acquisition costs was identified as a new challenge. - FY2026-H1WorsenedAnnual report
「Goodwill amortization included in EBITDA was ¥43 million (¥28 million in the same period of the previous year), relating to goodwill from the acquisition of subsidiaries in the Education and Reuse businesses.」
New M&A increased the goodwill balance from ¥300 million to ¥465 million, while goodwill amortization increased from ¥28 million in the same period of the previous year to ¥43 million. The exposure of results to the impact of M&A is increasing. - FY2025Goodwill balance declines, but amortization continuesAnnual report
「Goodwill amortization was ¥63.342 million, and the goodwill balance at the end of the consolidated fiscal year was ¥300.171 million.」
The goodwill balance decreased from ¥338.298 million in the previous fiscal year to ¥300.171 million, while impairment losses of ¥18.068 million on store equipment and other assets were recorded in the current fiscal year. Risks relating to goodwill amortization and impairment following M&A continue. - FY2025-H1RestatedAnnual report
「Goodwill amortization included in EBITDA was ¥28 million (¥25 million in the same period of the previous year), primarily relating to goodwill from the acquisition of an Education business subsidiary. As the company actively pursues this M&A strategy, it discloses EBITDA as useful comparative information, taking into account the possibility that goodwill recognized and goodwill amortization may have a significant impact on results.」
The company continues to recognize the impact of goodwill amortization associated with M&A on results and discloses EBITDA, including ¥28 million in amortization, as comparative information. - FY2024-Q3MaterialisedAnnual report
「During the consolidated third-quarter period, the company acquired the shares of 株式会社灯学舎 and made it a subsidiary, resulting in an ¥88.023 million increase in goodwill in the Education business segment.」
The acquisition of 灯学舎 generated ¥88.023 million in goodwill, newly quantifying the risks relating to the post-M&A goodwill balance and future amortization and impairment. - FY2023MaterialisedAnnual report
「The goodwill balance at the end of the consolidated fiscal year was ¥325 million, and impairment losses of ¥32 million were recorded.」
Goodwill increased from ¥9 million in the previous fiscal year to ¥325 million in connection with the acquisition of Tokyo Guidance and other businesses, while impairment losses of ¥32 million were recorded in the current fiscal year. Risks relating to goodwill and business assets following M&A have materialized. - FY2023-Q3MaterialisedAnnual report
「This was mainly due to a ¥195 million decrease in cash and deposits, a ¥199 million increase in accounts receivable, an ¥88 million increase in merchandise, and a ¥329 million increase in goodwill.」
Goodwill increased by ¥329 million, mainly against the backdrop of the acquisitions of Tokyo Guidance and OLD FLIP as subsidiaries. Impairment losses of ¥2.4 million were also recorded in the Education business, indicating that risks relating to goodwill and business assets following M&A continue to materialize. - FY2023-Q2MaterialisedAnnual report
「This was mainly due to a ¥277 million decrease in cash and deposits, a ¥64 million increase in accounts receivable, a ¥26 million increase in merchandise, and a ¥345 million increase in goodwill.」
Goodwill increased by ¥345 million in connection with the acquisition of Tokyo Guidance and OLD FLIP as subsidiaries. Impairment losses of ¥2.4 million were also recorded in the Education business, indicating that risks relating to goodwill and business assets following M&A have materialized. - FY2023-Q1MaterialisedAnnual report
「This was mainly due to a ¥403 million decrease in cash and deposits, a ¥128 million increase in accounts receivable, a ¥156 million increase in merchandise, and a ¥359 million increase in goodwill.」
Goodwill increased by ¥359 million in connection with M&A, including the acquisition of Tokyo Guidance. Impairment losses of ¥2.4 million were also recorded in the Education business, indicating that risks relating to goodwill and business assets following the acquisition have materialized. - FY2022RestatedAnnual report
「When conducting M&A, we conduct detailed due diligence on the target company's financial position, contractual relationships and other matters and strive to avoid risks as far as possible. However, contingent liabilities or unrecognized liabilities may arise after an M&A transaction. In addition, goodwill and other assets arising on acquisition must be amortized over the period during which the benefits of their excess earning power are expected to be realized.」
The company continues to disclose the treatment of contingent and unrecognized liabilities following M&A, goodwill amortization and impairment risks, and measures taken through due diligence. - FY2021WorsenedAnnual report
「¥324 million, mainly due to the recording under extraordinary losses of ¥774 million in losses related to COVID-19, ¥139 million in impairment losses on store fixed assets, and ¥138 million in impairment losses on goodwill.」
Impairment losses on goodwill following M&A rose to ¥138 million from ¥14 million in the previous fiscal year. Impairment losses of ¥139 million on store fixed assets were also recorded, indicating an increasing impact from risks relating to acquisitions and business assets. - FY2021-Q3MaterialisedAnnual report
「Impairment Losses」
During the cumulative third-quarter period, impairment losses of ¥21.155 million were recorded and allocated to the Beauty business (¥10.271 million) and the Kimono and Jewelry business (¥10.884 million). Impairment risk relating to goodwill and business assets following M&A continues to materialize. - FY2020MaterialisedAnnual report
「Net income attributable to owners of the parent was ¥3 million, down 97.6% from the previous fiscal year, despite a gain on the recognition of negative goodwill from the acquisition of a new subsidiary, due in part to an impairment charge on goodwill and the reversal of deferred tax assets.」
The company recognized an impairment loss on goodwill related to the M&A transaction, recording ¥14.122 million in impairment losses on goodwill generated by the acquisition of shares in 株式会社みうら. - FY2020-Q3MaterialisedAnnual report
「In addition, the M&A transaction resulted in acquisition-related expenses and higher goodwill amortization, and the company recorded an operating loss of ¥31 million, compared with operating profit of ¥116 million in the same period of the previous year.」
Acquisition-related expenses and higher goodwill amortization after the M&A transaction were actually recorded and disclosed as factors contributing to the change from operating profit to an operating loss of ¥31 million. Goodwill related to the acquisition of 株式会社Ｌ.Ｂ.Ｇ increased by ¥165.286 million. - FY2018First statedAnnual report
「Contingent liabilities and unrecognized liabilities may arise after an M&A transaction. In addition, goodwill and other assets recognized at the time of an acquisition must be amortized over the period during which the benefits of their excess earning power are expected to materialize. New goodwill may arise in the future, increasing amortization expense. If the acquired company's performance deteriorates significantly and a condition in which losses are expected to continue over future periods persists, impairment charges may become necessary, potentially affecting the group's performance.」
The company systematically disclosed not only the growth opportunities from M&A but also contingent and unrecognized liabilities after an acquisition, higher goodwill amortization expense, and impairment resulting from deterioration in the acquired company's performance as investment risks.