EU firms pressed on overpriced acquisitions European companies are under mounting pressure to come clean about overpriced acquisitions after regulators found that losses taken on past deals were suspiciously low. In a warning shot ahead of the release of 2012 results by many companies, the pan-European securities regulator on Monday questioned why weak economic conditions had not caused heavier writedowns. Steven Maijoor, chairman of the European Securities and Markets Authority, said he feared that listed companies were taking an excessively optimistic view of the value of takeovers agreed in more buoyant times. "Issuers tend to be slow in recognising losses," he said. Economic circumstances have changed fundamentally in the past years and that needs to be reflected. The concern follows a pioneering Esma survey of goodwill impairments at a sample of 235 listed European companies carrying significant amounts of goodwill. Goodwill is the asset created when the price of an acquisition exceeds the value of the target's net identifiable assets. At listed EU companies, it must undergo an "impairment test" once a year to see if its value has decreased. Deteriorating economic conditions can trigger writedowns by reducing the cash flows that assets are expected to generate. Having held €790bn of goodwill at the start of 2011, the companies surveyed by Esma suffered €40bn of impairment losses during the course of the year. That only 5 per cent was written down was a "clear indicator that there might be too much optimism in financial statements regarding goodwill," Mr Maijoor told the Financial Times, although he did not say how big the losses should have been. The pan-European securities regulator also said some companies had been using overly bullish predictions for their longer-term growth when carrying out goodwill impairment tests. It said it expected listed companies and their auditors to consider its findings when preparing their financial statements. Marc Hayn, a managing director at Houlihan Lokey, an investment bank that tracks goodwill, said the report was unlikely to affect the size of impairment losses that European companies will shortly announce as annual results season gets into gear. Many would have already carried out their impairment tests in October and November, he said. However, companies could yet alter the way they present detail about these calculations to investors, he added. Esma found that disclosure in this area was often of a formulaic nature and did not contain enough information specific to the company. Houlihan Lokey said members of the Stoxx Europe 600 index of large listed European businesses took an unusually large €19bn of goodwill impairments in the first three quarters of 2012. European companies that took big goodwill impairment losses in 2011 included the Italian bank Intesa Sanpaolo, which took a €10bn writedown. Others were UniCredit, Telecom Italia, Rio Tinto, Deutsche Telekom and Carrefour.