Accounting and reporting for goodwill has been on the agenda of the Financial Accounting Standards Board, the International Accounting Standards Committee, the UK's Accounting Standards Board, and the US Congress. Goodwill has also been the subject of Securities Exchange Commission rulings directed at specific companies. The attention directed towards goodwill would suggest that it is a material asset for a large number of firms. This article analyses the market perception of goodwill as an asset in the determination of the firm's valuation. Also explored is whether the market values goodwill to the same degree as it values other assets. The results of this study found that the market perceives goodwill as an asset and incorporates the information in the valuation of a firm. The findings of this study could be of importance to those involved in and affected by standard-setting deliberations involving goodwill.
In this study, managers of U.S. firms with operations in the Caribbean region evaluated the attractiveness of twenty host country incentives. Multivariate analysis of variance was employed to determine whether incentive preferences were a function of investment characteristics. The results indicate that incentive preferences depend on the type of investment, market orientation, size of investment, geographic location, year of investment, and type of product. Furthermore, exporters considered import duty concessions to be more desirable than did investors oriented toward the local markets. These results indicate that government programs waiving import duties, such as the free trade zones of the Dominican Republic and the maquiladora program of northern Mexico, are providing the incentive deemed most important by their targeted investors.In orderto attractforeign direct investment, many developing countries have offered various investment incentives. The competition among countries seeking investment has led to a proliferation of the types of incentives provided to foreign investors. Potential investors are now faced with a dizzying array of host government incentives. In fact, one study identified fifty-one different types of incentives given by developing countries to *RobertJ. Rolfe is AssociateProfessorof Accountingat the College of Business Administration, Universityof SouthCarolina,Columbia.
Accounting for convertible debt has long been a source of controversy in the accounting profession in the U.S. Current U.S. accounting rules require classifying convertible debt at date of issuance as “entirely debt” until conversion, despite numerous studies that assert that convertible debt is not “entirely debt”, but is a blend of debt and equity. Convertible debt has taken on international interest because of the issuance of International Accounting Standard (IAS) 32, Financial Instruments; Disclosure and Presentation, which prescribes reporting separate debt and equity components for convertible debt. This study examines convertible debt issued by U.S. firms and non‐U.S. firms listed in the U.S. using a levels approach. Specifically, convertible debt is compared to straight debt and contrary to ex ante expectation, convertible debt was not found to be perceived as being significantly different than straight debt for U.S. firms for any years and is statistically different in only two of the six years tested for non‐U.S. firms. The validity of this study's findings is underscored by its research design, which compares convertible debt and straight debt issued by the same firms. The findings suggest that investors regard reported amounts of convertible debt similar to straight debt in their assessment of firm value.
SEC, the FASB, Congress, and others are taking a critical look at accounting and reporting for goodwill. But how is goodwill actually affecting corporate balance sheets? The authors studied goodwill reporting and its impact for a large number of firms, to find out.
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