The impact of different goodwill accounting methods on stock prices: A comparison of amortization and impairment-only methodologies

Bagna, Emanuel; Ramusino, Enrico Cotta; Ogliari, M

doi:10.1016/j.irfa.2022.102432

Cited by 5 publications

(2 citation statements)

References 37 publications

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“…In addition, similarly to other value relevance studies, the analysis could be useful for regulators (Barth et al , 2001). In particular, the study contributes to the current debate on goodwill and the effectiveness of the impairment procedure (Bepari and Mollik, 2017; Ferramosca and Allegrini, 2021; Linsmeier and Wheeler, 2021; Amel-Zadeh et al , 2023; Bagna et al , 2023; Hellman and Hjelström, 2023), as recently enhanced by the IASB proposals.…”

Section: Introductionmentioning

confidence: 93%

The information content of half-yearly goodwill impairment losses: analysis of the European context

Roncagliolo

2023

IJAIM

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Purpose This study aims to contribute to the debate on goodwill accounting by examining the information content of impairment losses recognized in half-yearly reports. Half-yearly reports provide a suitable context to examine the effectiveness of the impairment process. Due to IFRIC 10 requirements, indeed, managers may have incentives to avoid recognizing impairment losses at the interim reporting date. Design/methodology/approach The study adopts an archival approach. Based on the traditional Ohlson’s model (1995), it explores the information content of half-yearly impairment losses in the European context over the period 2007–2017. Findings Findings confirm the relevance of half-yearly reports and suggest that half-yearly impairment losses are significantly associated with stock prices. In particular, investors positively value companies that recognized goodwill impairment losses at the interim reporting date. Research limitations/implications The study contributes to the academic debate on goodwill and the effectiveness of the impairment procedure. In particular, it provides empirical evidence on the recognition of goodwill write-offs when it is possible to avoid the impairment test in the absence of indications of impairment. Practical implications Findings of this study can support the current debate on accounting for goodwill also in the light of the recent proposals of the IASB on the need to improve the effectiveness of the impairment test. Originality/value This study provides original empirical evidence on the goodwill impairment test in half-yearly reports, extending previous research that typically examines this issue in annual reports.

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Section: Introductionmentioning

confidence: 93%

The information content of half-yearly goodwill impairment losses: analysis of the European context

Roncagliolo

2023

IJAIM

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“…These results contrast with those of Bugeja and Gallery (2006) under the amortisation regime, by concluding that the market assumed that the remaining goodwill balance has lost its value relevance. The study of Bagna, Ramusino and Ogliari (2023) shows that the information provided by listed companies to market investors, under the current accounting regime (impairment-only), is value relevant and contributes to explain the level of the market to tangible book value multiple.…”

Section: Literature Reviewmentioning

confidence: 99%

Stakeholder’s Perception of Subsequent Goodwill Measurement: An Analysis of IASB Comment Letters

D'Orey,

Carvalho

2023

ECKM

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Goodwill is the most intangible of intangibles and continues to generate great debate in academic, business, and regulatory circles, with no consensus on its subsequent measurement. In early 2020, the International Accounting Standards Board (IASB) published a discussion paper entitled DP/2020/1 Business Combinations – Disclosures, Goodwill and Impairment, to gather input on more useful disclosures on business combinations, bringing back to the discussion the subject of the subsequent measurement of goodwill. The IASB received comments on its proposed disclosures, as well as new evidence and arguments on how to account for goodwill, having received 193 comment letters from a wide range of stakeholders. This study aims to analyse the perception of those interested parties about the subsequent measurement of goodwill proposed by the IASB, as well as the arguments used for its reasoning. For this purpose, the content of stakeholder’s comment letters was analysed and classified as academics, auditors, investors, standard setters, preparers, regulators/securities, and others, and by region. In addition, the preparers’ comment letters were subclassified by sectors of activity to identify differences in the perception of preparers by industry. These differences point to the need to reflect on the existence of more than one goodwill measurement model, which best fits the sector of activity, a pioneering aspect in research on goodwill. The results reveal a preference trend for the systematic amortisation of goodwill. In all categories of stakeholders, apart from the "Others", the preference is for the reintroduction of goodwill amortisation. Similarly, most stakeholders in the Americas, Asia, Europe, and Oceania are in favour of reintroducing the systematic amortisation of goodwill. In some industries (Automotive, Banking, Luxury Goods, Electrical Appliances, Energy and Technology) no preparer prefers the impairment-only model, which suggests that perhaps in those sectors of activity, this model is not suitable. This study contributes to the literature on the subsequent measurement of goodwill, as well as to the different stakeholders, by presenting, under different perspectives of analysis, the respondents' preferences on the subsequent measurement of goodwill, as well as the arguments in favour of each model.

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Corporate governance, financial indicators and asset impairments during the COVID-19 pandemic period

Vichitsarawong,

Eng

2023

Finance Research Letters

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The impact of different goodwill accounting methods on stock prices: A comparison of amortization and impairment-only methodologies

Cited by 5 publications

References 37 publications

The information content of half-yearly goodwill impairment losses: analysis of the European context

The information content of half-yearly goodwill impairment losses: analysis of the European context

Stakeholder’s Perception of Subsequent Goodwill Measurement: An Analysis of IASB Comment Letters

Corporate governance, financial indicators and asset impairments during the COVID-19 pandemic period

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