Changes in the value relevance of goodwill accounting following the adoption of IFRS 3

Hamberg, Mattias; Beisland, Leif Atle

doi:10.1016/j.intaccaudtax.2014.07.002

Cited by 47 publications

(47 citation statements)

References 38 publications

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“…In line with authors like Nobes and Parker (), Ball (), Callao et al. (), Hung and Subramanyam () or Hamberg and Beisland (), it is likely that the effects are more significant in these contexts for several reasons. Unlike the studies related to SFAS, in these contexts there is no transition period and the amortisation period is considerably shorter.…”

Section: Related Literature and Hypothesessupporting

confidence: 69%

“…However, other authors do not support these results and show that there is a decrease in relevance and an increase in the bias of goodwill valuation after the impairment test is applied (Carlin and Finch , ; Bens et al. ; Guthrie and Pang ; Hamberg and Beisland ; André et al. ).…”

Section: Related Literature and Hypothesesmentioning

confidence: 92%

“…It is also important to highlight that unlike the majority of studies, for example, those by McCarthy and Schneider (), Chatraphorn (), Beatty and Weber () and Li et al. (), this study is not based on variables of equity markets nor is it carried out in the context of the SFAS, so it brings a new dimension to the study and avoids the problems associated with the use of market values, as pointed out by authors such as Ramanna (), Jarva (), Lee () and Hamberg and Beisland ().…”

Section: Related Literature and Hypothesesmentioning

confidence: 99%

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The Economic Effects of IFRS Goodwill Reporting

Martínez

Rubio

2017

Australian Accounting Review

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The promotion of the international harmonisation of goodwill accounting has led to the approval of SFAS 141 and 142 and IFRS 3, IAS 36 and IAS 38. The aim was to improve the quality and comparability of financial statements through these standards by eliminating the pooling of interests method and substituting the application of amortisation with an annual impairment test. However, recent decisions by regulating bodies such as the FASB, the IASB and the European Parliament have compromised this harmonisation. Currently, steps are being taken to reintroduce systematic amortisation in conjunction with the impairment test. In this dual normative scenario, where two accounting methods coexist (impairment test or amortisation), we analyse the economic consequences of the application of one method over the other in the information transmitted by the firms listed in the Spanish securities market. The contrast of two periods, pre- IFRS (1998to 2004) and post-IFRS (2005, reveals that the application of either of these methods affects financial statements and the usefulness of the information. Therefore, the possibility of opting for one or the other could distort the quality and comparability of the information transmitted by firms and the accurate assessment of future cash flows.

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Section: Related Literature and Hypothesessupporting

confidence: 69%

Section: Related Literature and Hypothesesmentioning

confidence: 92%

Section: Related Literature and Hypothesesmentioning

confidence: 99%

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The Economic Effects of IFRS Goodwill Reporting

Martínez

Rubio

2017

Australian Accounting Review

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“…This means that goodwill impairments do contain some timely information, but it remains too unclear for the authors to draw any conclusions on the relationship between annual returns and the lead impairment variable. Hamberg and Beisland (2014) also perform a return regression in order to analyze the perceived timeliness of goodwill impairments in Sweden. Their findings suggest that impairment recognition might not be timely.…”

Section: Prior Literature and Hypothesesmentioning

confidence: 99%

The Impact of Audit Quality Indicators on the Timeliness of Goodwill Impairments: Evidence from the German Setting

Albersmann

Quick

2020

Abacus

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This study investigates whether goodwill impairments are perceived as timely and whether specific auditor characteristics affect the perceived timeliness. It therefore contributes to central questions in accounting research: is managerial discretion over accounting numbers (accounting choice) good or bad for stakeholders and does audit quality have an impact on this relationship? It is motivated by the IASB's post‐implementation review on business combinations and the Goodwill and Impairment project based on it, the ongoing debate on the decision usefulness of impairment testing, and the question whether auditors have an impact on firms’ reporting of impairment losses. Based on a sample of German listed firms for the period 2006 to 2013, the results indicate that goodwill impairments are not recognized in a timely manner and delayed by at least one to two years. Moreover, the findings suggest that the recognition of impairment losses is influenced by auditor characteristics. In particular, firms seem to report goodwill impairments in a more timely fashion when they are audited by a Big 4 auditor, whereas the timeliness seems to decrease with a higher non‐audit fee ratio and a longer auditor tenure. Moreover, additional analyses indicate that higher audit fees lead to more timely impairments.

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“…It has also been claimed that economic benefits associated with goodwill have been enhanced by IFRS requiring the impairment test for goodwill (Russell, ). Bloom (, 383) points out that users of accounting information find it “impossible to accept that goodwill should be amortized, thus diminishing profits, at the same time that considerable sums were also being expensed as a result of effort to maintain and improve the value of goodwill.” In addition, using Swedish data, Hamberg and Beisland () find that goodwill impairments are value relevant while amortization is not under local GAAP. However, when Sweden adopted IFRS, goodwill impairments under the impairment‐only approach were no longer associated with stock returns.…”

Section: Literature Review and Propositionsmentioning

confidence: 99%

Evolution of intangible asset accounting: Evidence from Australia

Dinh

Kang²,

Morris³

et al. 2018

Financ Manag Account

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This study investigates how the adoption of IFRS in Australia has changed the accounting for goodwill and identifiable intangible assets (IIA). Based on unique hand‐collected data for 802 Australian firm‐years during 2000–2010, we find that expenses related to IIA are higher under IFRS, which is consistent with the view that IFRS accounting policies for IIA are stricter than those under Australian domestic accounting standards pre‐2005 (AGAAP). Our results show two effects that accompany higher IIA expenses under IFRS, which reduce a negative impact on earnings: (i) lower goodwill expenses, and (ii) a shift in recognition of IIA from those with finite useful life to IIA with indefinite useful life. Finally, our market value analyses suggest that the market does not treat mechanical goodwill amortization as a genuine expense, but does treat as genuine expenses discretionary impairment charges, and more lenient IIA amortization under AGAAP. Our results are in line with prior Australian studies claiming that imposing stricter accounting rules for intangible assets under IFRS tends to diminish the quality of investors' information set.

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Changes in the value relevance of goodwill accounting following the adoption of IFRS 3

Cited by 47 publications

References 38 publications

The Economic Effects of IFRS Goodwill Reporting

The Economic Effects of IFRS Goodwill Reporting

The Impact of Audit Quality Indicators on the Timeliness of Goodwill Impairments: Evidence from the German Setting

Evolution of intangible asset accounting: Evidence from Australia

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