Does a goodwill impairment regime better reflect the underlying economic attributes of goodwill?

Keryn Chalmers, Jayne Godfrey, John Webster

Research output: Contribution to journalArticleResearchpeer-review

31 Citations (Scopus)

Abstract

IFRS adoption transformed the accounting treatment for goodwill in many countries. Instead of amortizing goodwill, firms now test for its impairment and write off impairment losses against income. Accounting standard-setting bodies claim that an impairment regime better reflects the underlying economic value of goodwill than systematic amortization. We investigate this claim by comparing the association between goodwill accounting charges against income and firmsa?? economic investment opportunities in amortization and impairment regimes. We find that the association between firmsa?? goodwill charges against income and the firmsa?? investment opportunities is stronger during the IFRS regime than the AGAAP regime. This indicates that, as claimed, impairment charges better reflect the underlying economic attributes of goodwill than do amortization charges.
Original languageEnglish
Pages (from-to)634 - 660
Number of pages27
JournalAccounting and Finance
Volume51
Issue number3
DOIs
Publication statusPublished - 2011

Cite this

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title = "Does a goodwill impairment regime better reflect the underlying economic attributes of goodwill?",
abstract = "IFRS adoption transformed the accounting treatment for goodwill in many countries. Instead of amortizing goodwill, firms now test for its impairment and write off impairment losses against income. Accounting standard-setting bodies claim that an impairment regime better reflects the underlying economic value of goodwill than systematic amortization. We investigate this claim by comparing the association between goodwill accounting charges against income and firmsa?? economic investment opportunities in amortization and impairment regimes. We find that the association between firmsa?? goodwill charges against income and the firmsa?? investment opportunities is stronger during the IFRS regime than the AGAAP regime. This indicates that, as claimed, impairment charges better reflect the underlying economic attributes of goodwill than do amortization charges.",
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Does a goodwill impairment regime better reflect the underlying economic attributes of goodwill? / Chalmers, Keryn; Godfrey, Jayne; Webster, John.

In: Accounting and Finance, Vol. 51, No. 3, 2011, p. 634 - 660.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - Does a goodwill impairment regime better reflect the underlying economic attributes of goodwill?

AU - Chalmers, Keryn

AU - Godfrey, Jayne

AU - Webster, John

PY - 2011

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N2 - IFRS adoption transformed the accounting treatment for goodwill in many countries. Instead of amortizing goodwill, firms now test for its impairment and write off impairment losses against income. Accounting standard-setting bodies claim that an impairment regime better reflects the underlying economic value of goodwill than systematic amortization. We investigate this claim by comparing the association between goodwill accounting charges against income and firmsa?? economic investment opportunities in amortization and impairment regimes. We find that the association between firmsa?? goodwill charges against income and the firmsa?? investment opportunities is stronger during the IFRS regime than the AGAAP regime. This indicates that, as claimed, impairment charges better reflect the underlying economic attributes of goodwill than do amortization charges.

AB - IFRS adoption transformed the accounting treatment for goodwill in many countries. Instead of amortizing goodwill, firms now test for its impairment and write off impairment losses against income. Accounting standard-setting bodies claim that an impairment regime better reflects the underlying economic value of goodwill than systematic amortization. We investigate this claim by comparing the association between goodwill accounting charges against income and firmsa?? economic investment opportunities in amortization and impairment regimes. We find that the association between firmsa?? goodwill charges against income and the firmsa?? investment opportunities is stronger during the IFRS regime than the AGAAP regime. This indicates that, as claimed, impairment charges better reflect the underlying economic attributes of goodwill than do amortization charges.

U2 - 10.1111/j.1467-629X.2010.00364.x

DO - 10.1111/j.1467-629X.2010.00364.x

M3 - Article

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SP - 634

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JO - Accounting and Finance

JF - Accounting and Finance

SN - 0810-5391

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