Goodwill and accounting discretion

Accounting Discretion

This study investigates the factors affecting acquirers’ allocation of purchase price between goodwill and identifiable intangible assets with finite lives. SFAS 142 replaces goodwill amortization with periodic impairment tests that are based on fair value estimates, while most identifiable intangible assets are still amortized over finite useful lives. As a result of the differential accountin...

Has Goodwill Accounting Gone Bad?

Accounting Discretion, Corporate Governance and Firm Performance

We investigate whether accounting discretion is (i) abused by opportunistic managers who exploit lax governance structures, or (ii) used by managers in a manner consistent with efficient contracting and shareholder value-maximization. Prior research documents an association between accounting discretion and poor governance quality and concludes that such evidence is consistent with abuse of the...

Is Amortization Good Enough? Evidence from the U.K. Goodwill Accounting

Before 2001, the accounting practitioners generally amortize the cost of intangibles over an arbitrary decided period of time. The accounting treatment lies in two perspectives: first, the value of goodwill will eventually decline; second, the recognition of amortization expenses is to meet the requirement of matching principle. However, later research indicates that the value of goodwill does ...

Accounting Discretion and Purchase Price Allocation after Acquisitions

This study investigates acquirers’ allocation of purchase price between goodwill and identifiable intangible assets upon the completion of acquisitions. SFAS 142 replaces goodwill amortization with periodic impairment tests based on fair value estimates, while most identifiable intangible assets are still amortized over finite useful lives. As a result of the new differential accounting treatme...