Big bath and goodwill impairment

Gonçalves, Cristina; Ferreira, Leonor Fernandes; Rebelo, Efigénio; Fernandes, Joaquim Santana

doi:10.7819/rbgn.v21i2.3977

Cited by 4 publications

(3 citation statements)

References 36 publications

(102 reference statements)

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“…In a study applied to Portuguese companies, Castro (2012) cannot reach a conclusion about big bath practices, while Alves (2011Alves ( , 2013 confirms the relevance of IMP_GW as a discretionary element of accruals. Gonçalves et al (2019), who analyzed Portuguese and Spanish companies, concluded that there are big bath practices, especially in Spanish companies.…”

Section: Negative Results (Pre-impairment)mentioning

confidence: 99%

A Path Analysis of Goodwill Impairment – Does Corporate Governance Matter?

Ferreira,

Fernandes,

Rebelo

2024

Journal of Intercultural Management

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Objective This paper examines the extent to which different corporate governance mechanisms affect the recognition and measurement of goodwill impairment, considering that these decisions are affected by a complex set of factors such as variables associated with corporate governance, economic/financial variables, and the market. Methodology We used data from 110 companies, both Spanish (75) and Portuguese (35), with listed securities, in the period 2010–2016 (unbalanced panel), and the path analysis method to infer financial and non-financial data relationships. Findings The results support the hypothesis that attributes linked to management and internal and external control mechanisms, as well as economic/financial, market and location variables, are directly and indirectly associated with the recognition of goodwill impairment. Value Added This paper outlines a company behavioral profile where opportunity seems to prevail over timely recognition and measurement of goodwill impairment. Big bath practices appear to be well founded, as well as the alignment of this strategy with market signals. Recommendations To foster the adoption of accounting practices close to the interests of all stakeholders, regulators should be encouraged to incentivize corporate governance models that promote the periodic rotation of the chief executive officer/chairman, the independence of all members of the statutory audit board, and training in economic and financial areas.

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Section: Negative Results (Pre-impairment)mentioning

confidence: 99%

A Path Analysis of Goodwill Impairment – Does Corporate Governance Matter?

Ferreira,

Fernandes,

Rebelo

2024

Journal of Intercultural Management

Self Cite

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“…142 (goodwill and other intangible assets) used discretion in determining goodwill impairment and found that more leveraged firms would have lower goodwill impairment to avoid violating debt covenants. Gonçalves et al (2019) analyzed the relationship between goodwill impairment and the big bath strategy for companies with securities traded on the Lisbon and Madrid stock exchanges from 2007 to 2015. Their results suggest that the recognition of impairment losses could play an important role in big bath practices in companies with already negative current earnings.…”

Section: Determinants Of the Recognition Of Impairment Of Non-current...mentioning

confidence: 99%

The incidence of impairment of non-current assets in the face of the covid-19 crisis

Bravo,

Santana,

Sarquis

2023

Rev. contab. finanç.

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This papers aims to investigate whether the incidence of impairment of non-current assets increased with the advent of the covid-19 crisis. The Brazilian accounting literature on the impact of covid-19 on businesses still lacks empirical evidence, especially on the impact of the crisis on long-term accounting variables, for which the effect of covid-19 is more difficult to determine. The topic is relevant because it provides investors, regulators, preparers, and auditors with insights into the impact that a future crisis similar to covid-19 could have on businesses. The work is also relevant to academia, as it is one of the first to analyze the effect of the pandemic on long-term assets. The findings allow us to reflect on how companies and sectors are more or less exposed to the risk of impairment in crises, providing inputs for investment decision making in these scenarios. We studied 383 Brazilian publicly traded companies registered with the Brazilian Securities and Exchange Commission (CVM) between 2016 and 2020. To test the hypothesis of this research, we manually collected the recognitions and reversals of impairment losses in 1,805 financial statements and, then, estimated a set of linear regression models with using fixed effects panel data. We found a positive and significant relationship between the effects of the covid-19 crisis and the incidence of impairment of non-current assets in Brazilian firms, which persisted even after controlling for various economic and financial factors. By separating the impairment of fixed and intangible assets, the findings suggest that intangible assets were more exposed to the covid-19 crisis than fixed assets. The results remained robust to various econometric analyses, including industry patterns, sub-samples, and the effect of the audit firm. This research contributes to the academic and professional debate by confirming the correlation between this crisis and the impairments recorded in financial statements, studying their effects on the accounting of non-current assets and on the long-term returns of the companies and sectors analyzed.

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“…Zang (2008) analisou se gestores das companhias que adotaram o SFAS n. 142 (goodwill and other intangible assets) utilizaram discricionariedade para determinar a perda por redução ao valor recuperável do goodwill e constatou que as empresas mais alavancadas teriam uma perda de redução do goodwill menor para evitar a violação dos covenants de dívida. Gonçalves et al (2019) analisaram a relação entre impairment de goodwill e a estratégia big bath de empresas com títulos negociados nas bolsas de Lisboa e de Madrid no período 2007 a 2015. Seus resultados apontam que o reconhecimento de perda por redução ao valor recuperável de ativos poderia assumir um papel importante em práticas de big bath em empresas com resultados correntes já negativos.…”

Section: Impairment Em Ativos Não Circulantesunclassified

A incidência de impairment de ativos não circulantes diante da crise da covid-19

Bravo,

Santana,

Sarquis

2023

Rev. contab. finanç.

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RESUMO O objetivo deste artigo foi investigar se houve aumento da incidência de impairment de ativos não circulantes com o advento da crise da covid-19. A literatura contábil brasileira sobre as implicações da covid-19 nos negócios ainda carece de evidências empíricas, especificamente sobre os reflexos dessa crise em variáveis contábeis de longo prazo, em que o efeito da covid-19 é mais difícil de ser determinado. O tema é relevante, pois revela aos investidores, órgãos reguladores, preparadores e auditores os efeitos que uma futura crise, similar à covid-19, poderá trazer aos negócios. O trabalho é também relevante para a academia, sendo um dos primeiros a analisar o efeito da pandemia em ativos de longo prazo. Os achados permitem uma reflexão sobre como empresas e setores estão mais ou menos expostos ao risco de impairment em crises, fornecendo inputs para a tomada de decisão de investimentos perante esses cenários. O estudo foi realizado com 383 companhias abertas brasileiras registradas na Comissão de Valores Mobiliários (CVM) no período de 2016 a 2020. Para testar a hipótese desta pesquisa, foram coletadas manualmente as constituições e reversões das perdas por impairment de 1.805 demonstrações financeiras e empregados modelos estatísticos de regressão linear com dados em painel de efeitos fixos. Constatou-se relação positiva e significante entre os efeitos da crise da covid-19 e a incidência de impairment de ativos não circulantes em companhias brasileiras, a qual manteve-se mesmo após o controle de diversos fatores econômico-financeiros. Ao segregar os impairments de ativos imobilizados e intangíveis, os achados sugerem que os ativos intangíveis estiveram mais expostos à crise da covid-19 em relação aos imobilizados. Os resultados permaneceram robustos nas diferentes análises econométricas realizadas, dentre as quais destacam-se padrões setoriais, subamostras e o efeito da firma de auditoria. Esta pesquisa contribui para o debate acadêmico e profissional ao confirmar a correlação dessa crise com os impairments lançados nas demonstrações financeiras, levantando seus efeitos na contabilização de ativos não circulantes e nos retornos de longo prazo das empresas e setores analisados.

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Big bath and goodwill impairment

Cited by 4 publications

References 36 publications

A Path Analysis of Goodwill Impairment – Does Corporate Governance Matter?

A Path Analysis of Goodwill Impairment – Does Corporate Governance Matter?

The incidence of impairment of non-current assets in the face of the covid-19 crisis

A incidência de impairment de ativos não circulantes diante da crise da covid-19

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