Does a goodwill impairment regime better reflect the underlying economic attributes of goodwill?
Date
2011
Authors
Chalmers, Keryn
Godfrey , Jayne
Webster , John C
Journal Title
Journal ISSN
Volume Title
Publisher
Blackwell Publishing Ltd
Abstract
IFRS adoption transformed the accounting treatment for goodwill in many countries. Instead of amortizing goodwill, firms now test for its impairment and write off impairment losses against income. Accounting standard-setting bodies claim that an impairment regime better reflects the underlying economic value of goodwill than systematic amortization. We investigate this claim by comparing the association between goodwill accounting charges against income and firms' economic investment opportunities in amortization and impairment regimes. We find that the association between firms' goodwill charges against income and the firms' investment opportunities is stronger during the IFRS regime than the AGAAP regime. This indicates that, as claimed, impairment charges better reflect the underlying economic attributes of goodwill than do amortization charges.
Description
Keywords
Keywords: Amortization; Goodwill; Impairment; Investment opportunity set
Citation
Collections
Source
Accounting and Finance
Type
Journal article
Book Title
Entity type
Access Statement
License Rights
Restricted until
2037-12-31