The effect of SFAS 142 on the ability of goodwill to predict future cash flows

Lee, Cheol

doi:10.1016/j.jaccpubpol.2010.11.001

Cited by 73 publications

(62 citation statements)

References 39 publications

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“…This study extends the work of Lee (2011) by investigating the association between the goodwill balance and the market value of an entity in a South African environment. Market value of equity is regarded as a better estimator of an entity's intrinsic value (Subramanyam & Venkatachalam, 2007) and therefore this approach enables us to investigate the value-relevance of goodwill to equity providers.…”

Section: Literature Reviewmentioning

confidence: 77%

“…Similar to the research models used in Barth, Clement, Foster, and Kasznik (1998) and Lee (2011), this study uses an Ohlson (1995) model that is modified to include separate variables for goodwill, the post-IFRS 3 period, and an interaction between these two variables. This equation can be expressed as follows:…”

Section: Methodsmentioning

confidence: 99%

“…Our study differs from prior research, as it not only investigates whether an impairment regime provides more relevant information to users, but also evaluates all the changes brought about by IFRS 3 for the initial and subsequent measurement of goodwill. Similarly, a study by Lee (2011) investigates whether goodwill is a better predictor of future cash flows since the adoption of SFAS 142. Lee focuses on the goodwill balance instead of only the impairment charge of goodwill and therefore provides comprehensive evidence of how users of financial statements perceive the implementation of SFAS 142.…”

Section: Literature Reviewmentioning

confidence: 99%

“…In another recent study, Lee (2011) investigates the effect of implementing SFAS 142 by also focusing on the goodwill balance instead of only the impairment charge of goodwill. Lee shows that the goodwill balance reported under SFAS 142 is a better predictor of future cash flows than the goodwill balance reported pre-SFAS 142.…”

Section: Introductionmentioning

confidence: 99%

“…Therefore, we cannot assume that the cash flows that actually eventuate are the same as the ex ante market assessment reflected in the market value of shares. The approach we follow thus provides a different perspective to investigate the valuerelevance of reported goodwill to equity investors, a perspective that cannot be assumed to yield the same results as a cash-flow-based examination, such as that undertaken by Lee (2011).…”

Section: Introductionmentioning

confidence: 99%

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The value-relevance of goodwill reported under IFRS 3 versus IAS 22

Eloff

Villiers

2015

South African Journal of Accounting Research

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The application of International Financial Reporting Standard (IFRS) 3, which became compulsory for financial periods beginning on or after 31 March 2004, significantly changed the initial and subsequent measurement of goodwill in annual reports. This change in the accounting treatment of goodwill was not universally accepted and there has been ongoing debate around the efficacy of the new goodwill treatment. This study uses a revised Ohlson-type value-relevance model (Ohlson, 1995)to examine the association between the goodwill balance reported and the market value of a company before and after the introduction of IFRS 3. The findings show that the goodwill balance reported according to IFRS 3 provides information that is more value-relevant than the previous International Accounting Standard (IAS) 22 treatment. In the light of the ongoing debate around the accounting treatment of goodwill, this study provides regulators and researchers with valuable information to further assess the efficacy of the IFRS 3 goodwill treatment.

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Section: Literature Reviewmentioning

confidence: 77%

Section: Methodsmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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