Goodwill Impairment - An Assessment of Disclosure Quality and Compliance Levels By Large Listed Australian Firms

Carlin, Tyrone M.; Finch, Nigel; Ford, Guy

doi:10.2139/ssrn.963078

Cited by 24 publications

(14 citation statements)

References 5 publications

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“…While AASB 136.80 provides some guidance on the choice of units for allocating goodwill for impairment testing 5 , management may manipulate the number of CGUs to which goodwill is allocated (Carlin et al, 2007). Further, management can manipulate goodwill impairment loss by estimating the amount of goodwill to be allocated to the CGUs.…”

Section: Goodwill Impairment Under Aasb 136 and Accounting Discretionmentioning

confidence: 99%

The role of corporate governance in accounting discretion under IFRS: Goodwill impairment in Australia

Kabir

Rahman

2016

Journal of Contemporary Accounting & Economics

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A major concern with the adoption of International Financial Reporting Standards (IFRS) is the accounting discretion allowed under the IFRS, and its potential opportunistic use by managers. We examine the role of corporate governance in the accounting discretion inherent in goodwill impairment decisions under the IFRS. More specifically, we investigate whether, in Australia, stronger governance strengthens associations between economic factors and goodwill impairment loss but weakens associations between contracting incentives and goodwill impairment loss. Using data from 2007 to 2012, we find evidence consistent with the notion that stronger governance enhances the associations between economic factors and goodwill impairment loss. However, we find that strong governance cannot completely eliminate the opportunistic use of discretion in an impairment decision, especially when pre-impairment income is negative, and when the impairment occurs in the first year of a CEO's tenure. Our results are robust with regards to alternative measures of the dependent variable, firm performance variables, and the governance variable, even after controlling for potential self-selection biases.JEL Classification: G34, M41

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Section: Goodwill Impairment Under Aasb 136 and Accounting Discretionmentioning

confidence: 99%

The role of corporate governance in accounting discretion under IFRS: Goodwill impairment in Australia

Kabir

Rahman

2016

Journal of Contemporary Accounting & Economics

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“…They are only to be expected when dealing with complex matters and they extend to users and regulators, as well as preparers. To illustrate, there was substantial non-compliance in the early post-IFRS reports of 50 large Australian Accounting and Business Research 273 listed companies with respect to impairment testing of goodwill (Carlin et al 2007). Accounting for goodwill has been a problem area in countries where capitalisation and amortisation of goodwill on acquisition had previously been required.…”

Section: Eliminating Barriers To Cross-border Investingmentioning

confidence: 99%

International Financial Reporting Standards: what are the benefits?

Brown

2011

Accounting and Business Research

180

112

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“…The information that was less disclosed was the analysis of sensitivity. Carlin, Finch and Ford (2007) analyze the quality of disclosure on goodwill impairment during 2006 for the top 20 companies by market capitalization on the Australian Stock Exchange. They found that the rates of clear noncompliance were surprisingly high.…”

Section: Summary Of Previous Researchmentioning

confidence: 99%

Goodwill’s Accounting Practices in Belgium and Compliance with IAS 36 Required Disclosures

Tchaptchet¹,

Colot²

2019

IBR

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This paper aims at studying the impact of the accounting treatment of goodwill on the mandatory disclosure required by the International Accounting Standard (IAS) 36 on the impairment test of goodwill. We use a sample comprising 79 companies listed on Brussels stock exchange to show that there is a great heterogeneity in current accounting treatment of goodwill. We identify two groups of companies: those that display the goodwill on a separate line in their balance sheet and those that integrate it in their intangible assets. For the later, the only way to notice the presence of goodwill is by looking at the financial statement’s notes presumably because those notes are expected to receive less scrutiny. Even if the compliance is not complete, the first group complies more with the paragraph 134 of IAS 36 than the other. Moreover, companies with a significant goodwill compared to both total assets and intangible assets are more compliant with IAS 36. The findings finally reveal that the notices issued by the Financial Service and Markets Authority (FSMA) have a limited impact on the disclosure level. There are some areas of improvement but others such as goodwill allocation to cash generating unit, determination of the recoverable amount, description of key hypothesis and the sensitivity test need more effort on compliance.

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Goodwill Impairment - An Assessment of Disclosure Quality and Compliance Levels By Large Listed Australian Firms

Cited by 24 publications

References 5 publications

The role of corporate governance in accounting discretion under IFRS: Goodwill impairment in Australia

The role of corporate governance in accounting discretion under IFRS: Goodwill impairment in Australia

International Financial Reporting Standards: what are the benefits?

Goodwill’s Accounting Practices in Belgium and Compliance with IAS 36 Required Disclosures

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