DVN Devon Energy Corp

   (FROM THE WALL STREET JOURNAL 11/24/15) 
   By Emily Chasan 

$25.7B: Total value of goodwill write-downs in 2014.

Corporate acquisitions that haven't worked out are taking a toll on balance sheets.

U.S. public companies recorded $25.7 billion in goodwill impairments, or write-downs, last year,according to a study of more than 8,700 firms from corporate financial adviser Duff & Phelps.The figure is upfrom $21.7 billion in 2013 but still less than levels in 2012, when impairmentstopped $50 billion.

The biggest number of companies in at least five years took hits to goodwill, or intangible assets, in 2014, with 341 companies reporting write-downs, up from 274 in 2013.

"The trend is moving toward bigger impairments," said Greg Franceschi, a managing director at Duff & Phelps.

The energy sector, hurt by the decline in oil prices, dominated goodwill write-downs last year with 32 companies, or 23% of the industry, reporting charges to goodwill, according to the study. The sector tallied $5.8 billion ingoodwillwrite-downsin 2014, up from $2.1 billion in 2013.

Devon Energy Corp. recorded the largest goodwill write-down last year, according to Duff & Phelps. The firm took a $1.9 billion fourth-quarter charge on a decade-old Canadian acquisition of gas assets. Devon Energysaid at the time that the noncash charge was "related to the recent drop in oil prices."

On average, individual companies took charges to goodwill of about $75 million last year, down 5% from the average in 2013, according to Duff & Phelps.

The torrent of deals announced this year means write-downs could surge next year, since companies often take their impairment one or two years after a deal closes, Mr. Franceschi said. If interest rates rise, that could affect the overall market value of companies and spur larger goodwill write-downs next year. Microsoft Corp., for example, said in July that it was taking a $7.6 billion goodwill write-down on its $9.4 billion deal for Nokia's handset business. The deal closed in April 2014.

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November 24, 2015 02:47 ET (07:47 GMT)

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