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

Eloff, Anne-Marie; Villiers, Charl de

doi:10.1080/10291954.2015.1006485

Cited by 15 publications

(26 citation statements)

References 28 publications

(31 reference statements)

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“…These studies focused on the value relevance of identifiable intangibles and goodwill pre-IFRS and post-IFRS adoption (Chalmers et al 2008;Goodwin et al 2008;Ji and Lu 2014;Oliveira et al 2010;Sahut et al 2011). Such studies were justifiable, given that the requirements of IFRS 3 regarding intangibles differed from previous reporting standards (Eloff and De Villiers 2015;Wines et al 2007). Most of these studies subsequently found goodwill to be more relevant post-IFRS adoption (Chalmers et al 2008;Goodwin et al 2008;Oliveira et al 2010).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Although the recognition and disclosure of goodwill in financial statements have been valuable for users (Ellis 2001;Ji and Lu 2014;Oliveira et al 2010;Sahut et al 2011), further investigation needs to be conducted in the area of goodwill, particularly whether the information content of goodwill (for investors to make economic decisions) changes as time progresses following a business combination. This interest is justifiable given that in 2008, the International Financial Reporting Standard 3 on goodwill (IFRS 3) introduced distinct requirements for initial goodwill measurement, as well as its measurement subsequently, which differs materially from previous reporting standards on goodwill (Eloff and De Villiers 2015;Shahwan 2004;Wines, Dagwell and Windsor 2007). In particular, the subsequent treatment of goodwill, according to IFRS 3, no longer requires that goodwill be systematically amortised over a prescribed period.…”

Section: Introductionmentioning

confidence: 99%

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The Value Relevance of Aged Goodwill: A South African Study

Omarjee

Yasseen

Mohamed

2019

SABR

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The purpose of this study was to determine whether goodwill, which is measured in accordance with International Financial Reporting Standard 3 (IFRS 3), is value relevant at acquisition and as time progresses, for a period of two years after acquisition. Using the Ohlson model, 126 JSE firm-year observations were tested. It was subsequently found that goodwill was not value relevant at acquisition date but did become value relevant as time progressed. The possible reasons for goodwill not being value relevant at acquisition are attributed to the manner in which IFRS 3 requires goodwill to be measured, the allowance of provisional values under IFRS 3, and the complexities associated with complying with IFRS 3. Goodwill being value relevant as time progresses is attributed to the subsequent measurement requirements of IFRS 3, in particular the annual impairment testing requirement as opposed to the previous amortisation requirements. This study was conducted in a South African context where limited studies on goodwill have taken place. The results are deemed to be useful to investors and standard setters as they hold implications for goodwill accounting practice and changes to goodwill accounting standards.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The Value Relevance of Aged Goodwill: A South African Study

Omarjee

Yasseen

Mohamed

2019

SABR

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“…This mandated the use of the purchase method and eliminated the amortisation of goodwill over the assessed useful life instead requiring an annual impairment test. International studies indicating that this change has been value relevant are supported by studies by Eloff and de Villiers (2015) and Omarjee and Garnett (2017) that indicates this also applies in the South African context.…”

Section: Theoretical Backgroundmentioning

confidence: 86%

Goodwill impairment testing disclosures – South African compliance in 2018

Day

2019

South African Journal of Accounting Research

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This paper reviews compliance with the IAS 36 goodwill impairment testing disclosure requirements by South African entities included in the All Share Index of the Johannesburg Stock Exchange. A detailed extraction of disclosures provided by entities with material levels of goodwill was compared to the key requirements. The approach taken is grounded in an assumption that the diligence with which preparers attend to visible disclosures acts a "litmus test" of the reliability of the invisible workings of the "black box" of impairment testing. The results are analysed through a critical narrative proposing insights relevant to preparers, auditors, regulators, and standard-setters. Consistent with results of studies in other jurisdictions the disclosures of South African entities are often incomplete and inconsistent, presented in a minimalist, generic, "boiler-plate" fashion considered to be of limited use to decision makers assessing the reliability of impairment testing. This is the first known detailed review of South African levels of compliance with goodwill impairment testing disclosure requirements offered as an initial contribution to assessing the reliability of goodwill balances reported by South African corporate entities.

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“…IASB has engaged in continuous attempts to improve goodwill accounting and reporting (Eloff and de Villiers, 2015; Seetharaman et al , 2004). Among their rules, emphasis has been placed on both the ability to recognize goodwill in accounts only if a business combination occurs (and, therefore, not when internally created) and the impairment of the asset (Seetharaman et al , 2006).…”

Section: The (In)coherence In Goodwill Accounting Standardsmentioning

confidence: 99%

The (in)coherence in accounting for goodwill

Garzella

Ferri

Fiorentino

et al. 2019

MEDAR

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Purpose In the process of harmonizing International Accounting Standards (IAS/IFRS), scholars and standard setters still need to overcome unresolved issues related to both goodwill duration and accounting recognition. This paper aims to compare the academic background on goodwill with current IAS. Specifically, the goal is to criticize existing practices and advance a revision of accounting for goodwill. Design/methodology/approach The paper is based on a review of the relevant literature on notions, theories and accounting approaches on goodwill and on an investigation of IAS/IFRS on accounting for goodwill. By critically integrating literature and practices, the authors provide implications for a revision of IAS. Findings The findings show the two main internally coherent theoretical approaches and the incoherence in current goodwill accounting standards. The paper contributes to the debate on accounting for goodwill by suggesting new conceptual arguments in relation to the controversies related to its accounting treatment. Practical implications The findings offer insights and guidelines that can help standard setters revise current accounting standards. Inter alia, standards setters should revisit issues related to goodwill evaluation and record limitations in future debates to find better solutions. Originality/value This study shows the incoherence of current accounting standards. Furthermore, the findings contradict the general opinion that, in current IAS, goodwill can be recognized only if acquired in business combinations and not if internally generated. Thereby, the authors suggest to shift the international accounting standards board focus from the preference between amortization and impairment to the coherence of goodwill accounting approaches.

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

Cited by 15 publications

References 28 publications

The Value Relevance of Aged Goodwill: A South African Study

The Value Relevance of Aged Goodwill: A South African Study

Goodwill impairment testing disclosures – South African compliance in 2018

The (in)coherence in accounting for goodwill

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