Judul : Goodwill and Carillion Bankruptcy
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Goodwill and Carillion Bankruptcy
Goodwill arises from an acquisition where the acquirer is willing to pay more than the total fair value of all identified net assets.
Carillion is a large construction company in the UK. Carillion built royal opera house and other big projects. The head office is in Wolverhampton. This company was declared bankrupt on 15 January 2018 ago.
Carillion is a multinational company with a total of 43 thousand employees, and around 20 thousand in the UK. So when it was declared bankrupt, it was thought that the case exploded, even though the UK itself had just left the European Union (brexit). The basic question is why can this company go bankrupt? Evidently...
Most of the asset carillion is in goodwill, whereas basically goodwil cannot be used to pay obligations. After being declared bankrupt, many critics asked why the value of goodwill in the Balance Sheet was very large, in 2016 the figure was £ 1.57 billion while the total capital was only estimated at £ 710 million.
The value of goodwill is more than double the value of capital. What result? ...
What are the consequences if the goodwill is so great? If the company does impairment, capital can be used up immediately. Then if the creditors ask for the loan to be returned, basically goodwill cannot be sold to repay the loan. And the majority of its assets from Carillion are this goodwill.
Why can the Carillion goodwill be so big?
The answer is to the fact that he often acquires construction projects for other companies with valuations greater than the original value of his contract. In 2017 alone, a total of £ 845 million in contract value was written off.
Aside from Carillion's goodwill, he also has other problems, namely; low profit margin, lots of sales in the form of accounts receivable, but distributing large amounts of dividends.
This raises questions from the public to members of the DPR in the UK, why can't the auditor detect it? Moreover, Carillion was audited by the Big Four, and from 2016 should have begun to be able to see the poor quality of their goodwill. Why is the new 2017 write off large?
Logically, which company is willing to erase the value of their assets? So the role of the auditor is actually very important to ensure that the company has properly and comprehensively tested the impairment of goodwill.
Carillion was audited by one of the Big Fours from 2014 to 2017. And in March 2018, three months after going bankrupt, FRC (a kind of OJK UK) investigated its auditors.
The problem that adds to the complexity is that Carillion's pension program has a deficit. This means that companies cannot pay pensions and severance pay for their employees. When it was declared Bankrupt the company had more than 40 thousand employees and still held 450 employment contracts with the UK government.
Ok, what lessons can we take from Carillion especially about goodwill? If the company has a very good goodwill and never records loss impairments, it is a sign, the risk is big. Because goodwill is the most intangible intangible asset.
In Indonesia since 2011 goodwill may no longer be amortized but is assessed for impairment every year. In US GAAP and IFRS even longer, amortization of goodwill has been banned, since 2002 and 2005
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