An Examination of Disclosure Quality of Goodwill Impairment Testing in a Post-IFRS Environment - A Stakeholder Perspective PDF Download
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Author: Tyrone M. Carlin Publisher: ISBN: Category : Languages : en Pages : 13
Book Description
The adoption of IFRS based reporting in Australia for all reporting periods commencing 1 January 2005 onwards resulted in substantial variations to prior accepted reporting practices. One area in which change was particularly profound was in the shift to an impairment testing based regime for goodwill accounting and reporting. The IFRS framework requires substantially greater levels of disclosure about the assumptions brought to bear in sustaining a valuation for goodwill. At face value, this should have resulted in improved transparency and the availability of higher levels of decision useful information. However, a review of disclosures relating to goodwill and its impairment by a sample of large Australian reporting entities in the first year after the transition to IFRS suggests substantial room for improvement. In particular, required disclosures were frequently omitted, or suggested that the technical requirements of the IFRS goodwill impairment testing process had not been complied with. Consequently, it is concluded that at present, it is in exceptional cases rather than a matter of generality that IFRS compliant disclosures sustain improved insights and support better decision making by financial statement users.
Author: Tyrone M. Carlin Publisher: ISBN: Category : Languages : en Pages : 13
Book Description
The adoption of IFRS based reporting in Australia for all reporting periods commencing 1 January 2005 onwards resulted in substantial variations to prior accepted reporting practices. One area in which change was particularly profound was in the shift to an impairment testing based regime for goodwill accounting and reporting. The IFRS framework requires substantially greater levels of disclosure about the assumptions brought to bear in sustaining a valuation for goodwill. At face value, this should have resulted in improved transparency and the availability of higher levels of decision useful information. However, a review of disclosures relating to goodwill and its impairment by a sample of large Australian reporting entities in the first year after the transition to IFRS suggests substantial room for improvement. In particular, required disclosures were frequently omitted, or suggested that the technical requirements of the IFRS goodwill impairment testing process had not been complied with. Consequently, it is concluded that at present, it is in exceptional cases rather than a matter of generality that IFRS compliant disclosures sustain improved insights and support better decision making by financial statement users.
Author: Marius Gros Publisher: ISBN: Category : Languages : en Pages : 23
Book Description
Prior research documented that higher disclosure quality reduces information asymmetry and cost of capital. Accordingly, firms have an incentive to comply with disclosure requirements and to provide voluntary disclosure. However, prior research on mandatory disclosures on goodwill impairment testing reveals low compliance among European firms. In this paper, we contribute to the literature and assist regulators, enforcers and standard setters by shedding light on the determinants of the observed low levels of compliance and voluntary disclosure. Consistent with economic theory, we reveal that firms determine the level of disclosure stra-tegically. We find firms with higher preparation and proprietary cost to show lower compli-ance and less voluntary disclosure while firms with higher growth opportunities provide better compliance and more voluntary disclosure. However, the strategic behavior is constrained by enforcement. Consequently, our results are more (less) pronounced within a weak (strong) enforcement environment.
Author: AICPA Publisher: John Wiley & Sons ISBN: 1937352803 Category : Business & Economics Languages : en Pages : 176
Book Description
This new guide provides accounting and valuation guidance for impairment testing of goodwill. Specifically, it focuses on practice issues related to the qualitative assessment and the first step of the two-step test. This resource is a valuable tool for auditors, accountants and valuation specialists seeking an advanced understanding of the accounting, valuation, and disclosures related to goodwill impairment testing (including the qualitative assessment). It is also a vital resource for preparers of financial statements of public and private companies that follow FASB guidance on goodwill.
Author: Laurent Lazar Publisher: ISBN: Category : Languages : en Pages :
Book Description
Goodwill accounting standards, according to International Financial Reporting Standard 3 (IFRS 3) and International Accounting Standard 36 (IAS 36), oblige firms to describe the circumstances that form the basis of the annual impairment testing. We observe that managers' interpretation or application of the IFRS is associated with the information content disclosed in financial statements. The use of boilerplate instead of firm-specific information decreases the information quality. This study investigates the disclosure quality of goodwill impairment testing under the IFRS of German listed companies between 2010 and 2015. Our results provide evidence that firm performance and goodwill impairment losses are positively linked to the quality of goodwill impairment disclosure. Furthermore, the results show that the magnitude of reported goodwill is negatively associated with the disclosure quality. Our findings are robust to additional tests and make several contributions to further research, regulation, and practice.
Author: Khairil Faizal Khairi Publisher: ISBN: Category : Accounting Languages : en Pages : 339
Book Description
The aim of this thesis is to contemplate the degree to which Singaporean firms comply with the highly technical disclosure requirements under FRS 36 specific to goodwill impairment testing between the years 2005 to 2007. It is also aims to explain why some firms find the implementation of goodwill impairment testing difficult. Singapore is chosen because of its advanced and economically significant economy in the heart of Asia, with a highly skilled professional workforce and strong institutional and financial infrastructure to support quality financial reporting. This thesis examined 168 firms reporting goodwill in three consecutive years, to establish compliance and disclosure quality post-transition. Data from multiple years, rather than a single year, are used in this thesis to test the consistency of the results. The thesis found that there was a slight improvement in the rate of compliance with this requirement over the period of the study. A significant Friedman test implies that the change was significant and it implies that the development is statistically significant. Findings indicated that compliance level and disclosure quality, although better than prior studies would have suggested, is still sporadic and unpredictable. However, the overall results of the analysis in this thesis suggest that in the majority of cases the level of compliance and disclosure quality of compliance among the Singaporean listed firms is low. This is particularly so for the cash-generating unit (CGU) definition and goodwill allocation, and key input variables used in estimating CGU recoverable amounts (especially on discount rates selection). The thesis also found no significant difference in audit quality, regardless of whether the audit was undertaken by Big Four or non-Big Four auditors. The Chi-square test for independence indicated no significant association between the types of auditors and the compliance level and disclosure quality. Based on these results, the majority of Singaporean firms face a high degree of difficulty in the translation from idea to action in implementing the requirements of the standard. Further, questions are raised about the quality of accounting information among goodwill-intensive firms in Singapore and the robustness of regulatory oversight institutions operating within Singapore.
Author: Caner Akbaba Publisher: ISBN: Category : Languages : en Pages :
Book Description
As it is well known that financial information is useful when it is relevant and represented faithfully what it purposes. In this regard, goodwill which represents both the future benefit expectation and the value attributed to the subsidiary by its parent company in fact, has to be relevant and faithfully reported in the financial statements of the parent company to help the investors and other participants to decide soundly. However, especially in Turkey despite the increase in mergers and acquisitions, compliance in reporting goodwill and impairment analysis was not studied sufficiently. At this point the issues “leaving goodwill write off only to the discretion of company management” and “reporting quality of goodwill and its impairment test” that need to be considered with a great deal in Turkey.As a result of historical evolution of accounting rules and practice, relatively advanced reporting standards on goodwill and impairment of goodwill were set up under IFRS and they are welcomed in most of the countries in the world. However, when we look at the Turkey case, there seems to be some problems in implementation of goodwill related reporting standards especially on impairment of goodwill. This study is limited with companies listed in Borsa Istanbul. Their annual reports that comply fully with IFRS stated between years 2008 and 2014 will be used. Financial figures presented in the annual reports will be compared with the mandatory disclosure requirements for IAS 36.
Author: Dung Manh Tran Publisher: ISBN: Category : Goodwill (Commerce) Languages : en Pages : 560
Book Description
This thesis focuses on goodwill impairment implemented and practised in the first three years after Hong Kong's adoption of the International Financial Reporting Standards (IFRS). Three issues - compliance, discount rate and audit quality with respect to goodwill impairment testing - are the focus of analytical and empirical attention. Understandably, one of the most controversial issues that has been discussed in financial reporting is goodwill. Goodwill impairment is argued to be one of the most difficult issues in practice. This thesis commences with a review of literature relating to goodwill with regard to its conceptualisation, techniques to avoid or alter its recognition, ways to measure and adjust it, and a description of key technical requirements of goodwill impairment in the context of Hong Kong. These issues are demonstrably reviewed in this thesis. This study focuses on filling the gap in knowledge of compliance, discount rate and audit quality in relation to goodwill impairment. To do so, detailed annual reports of listed firms collected from the Main Board of the Hong Kong Stock Exchange in the period from 2005 to 2007, were drawn upon. Employing analytical procedures and the Capital Asset Pricing Model (CAPM), the study provides persuasive evidence on the issues of compliance, discount rate and audit quality with respect to goodwill impairment. The thesis concludes that the rates of non-compliance and poor quality of disclosure pertaining to goodwill impairment conducted by Hong Kong firms reduced in the first three years after Hong Kong's adoption of IFRS. However, non-compliance levels and poor disclosure quality were still high. The sample firms had a tendency to understate discount rates in comparison with independently estimated discount rates in all three years of the investigation. In addition, audit quality among the Big 4 auditors is proved to be heterogeneous rather than homogeneous. The thesis concludes that a big gap exists between the standard requirements of goodwill impairment and practice. In the context of Hong Kong, this research demonstrates that the efficacy of this standard is low. It is therefore likely that the application of goodwill impairment in practice will continue to cause concern for policy makers and standard setters.
Author: Ervin L. Black Publisher: John Wiley & Sons ISBN: 1119157153 Category : Business & Economics Languages : en Pages : 290
Book Description
Concepts, methods, and issues in calculating the fair value of intangibles Accounting for Goodwill and Other Intangible Assets is a guide to one of the most challenging aspects of business valuation. Not only must executives and valuation professionals understand the complicated set of rules and practices that pertain to intangibles, they must also be able to recognize when to apply them. Inside, readers will find these many complexities clarified. Additionally, this book assists professionals in overcoming the difficulties of intangible asset accounting, such as the lack of market quotes and the conflicts among various valuation methodologies. Even the rarest and most problematic situations are treated in detail in Accounting for Goodwill and Other Intangible Assets. For example, the authors analyze principles for identifying finite intangible assets and appropriately accounting for amortization expenses or impairment losses. Using the information in this book, the results of these calculations can also be reported with precision on financial statements. These topics are especially important for ensuring the success of any asset acquisition or business combination. In these special cases, the utmost accuracy is essential. This book provides: Rules for identifying and recognizing intangible assets in business combinations and asset acquisitions Guidance on the accurate valuation and carrying amount calculation of acquired and self-created intangibles Tips for overcoming the challenges unique to intangible assets, including impairment testing Clear instructions for disclosing intangible assets, goodwill, and amortization expenses Accounting for Goodwill and Other Intangible Assets is an indispensable reference for valuation students and specialists. Ervin L. Black and Mark L. Zyla provide thorough instructions for understanding, accounting for, and reporting this challenging asset class.
Author: Tyrone M. Carlin
Author: Tyrone M. Carlin
Author: Tyrone M. Carlin
Author: Marius Gros
Author: AICPA
Author: Laurent Lazar
Author: Noé Vuille
Author: Khairil Faizal Khairi
Author: Caner Akbaba
Author: Dung Manh Tran
Author: Ervin L. Black