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In March 2020, the IASB issued a discussion paper – ‘Business Combinations – Disclosures, Goodwill and Impairment’ – which discussed, inter alia, whether to introduce a sort of counterreformation of IAS 36 that might lead to the reintroduction of goodwill amortization. Among other things, the IASB, leveraging key findings from academic research, qu...
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... However, given the potential implications of this decision, including establishing general norms and reducing related costs, some IASB members (eight out of 14) believed that the impairment method should still be maintained. The board reconvened on July 20, 2021, to further consider perspectives on goodwill accounting and the feasibility of reinstating goodwill amortization (Bagna et al., 2023). ...
... In 2021, the IASB made decisions on several issues, one of which was prioritizing the disclosure requirements package for business. Then, on May 27, 2022, the IASB reviewed more studies on whether goodwill's useful life can be predicted and the potential effects of shifting to an amortization-based methodology (Bagna et al., 2023). In Indonesia, regulations on the treatment of goodwill are governed by PSAK ( Pernyataan Standar Akuntansi Keuangan ) 22, which covers business combinations and was authorized by the Financial Accounting Standards Board on January 12, 2010, and later revised on August 27, 2014. ...
... (Zhao et al., 2023). Investors may make adverse decisions, potentially leading to a substantial decline in stock prices, in which such a decline could create systemic risks for the capital market and jeopardize a company's sustainability (Bagna et al., 2023). ...
Goodwill is generated when one firm merges with another one. When the amount spent on acquiring something is higher than the estimated worth of its assets, it is recorded as goodwill on the financial statement. In the past, goodwill used to be amortized. However, modern procedures now require annual impairment testing, which considers the belief that goodwill has an unlimited life and continued economic value. This study explores the disclosure of goodwill and impairment in technology companies in Indonesia and analyzes the consistency of goodwill impairment reporting under PSAK 48. The study also seeks to understand how technology companies in Indonesia apply accounting standards related to goodwill and its impact on financial statements and company performance. This work employs a qualitative research approach, utilizing data sources from a scoping evaluation of previous research on goodwill. This study demonstrates that the laws regulating goodwill have undergone many revisions, and goodwill is currently recognized as an asset obtained through a corporate merger. It is necessary to assess the impairment of goodwill annually. This research is anticipated to contribute to the existing knowledge on goodwill within financial accounting literature or academic scholarship framework.
... Most respondents believe that mandatory amortization will have an adverse impact on stock prices and reduce their ability to pay dividends [9]. The study on the correlation between the financial index and the value of intangible assets in 2024 by the University of Karachi showed that the value of intangible assets has a strong positive correlation with the net earning per share ratio (EPS) and a similar positive correlation with the return on asset ratio (ROA) [10]. ...
The rapid rise of modern scientific and technological innovation enterprises has injected vitality into the world's scientific and technological development, and at the same time, it has also brought changes and challenges to the traditional measurement methods of financial accounting. Research institutions, finance firms, and experts around the world are skeptical about the applicability of current methods of measuring intangible assets. One of the main reasons for these doubts is that intangible assets, such as patents, goodwill value, etc., play a huge role in the productivity development and profit growth of enterprises. However, this role is easily ignored and underestimated in the process of accounting recognition and measurement under the cost method. At present, the more common fair value valuation is estimated through the external market and the stock market, but the external valuation often leads to misestimation due to information asymmetry, which brings risks to the decision-making of information users. This paper uses the example method and literature analysis method to analyze the insufficient consideration of intangible asset valuation by the traditional intangible asset valuation method and the potential risks caused by M&A and financing. On this basis, the reasonableness of the current trial improvement measures is evaluated, and the relatively reasonable solutions are compared. It explains why the "deep disclosure method" is a relatively safe and operable strategy in the current accounting standards and environment.
... The international: No. (36), [16] and Egyptian: 31, standards for impairment in the value of assets refer to the definition of impairment as the amount of decrease in the recoverable value of the fixed asset from its book value [17]. To know this impairment, the standard requires a re-evaluation of the assets at the end of the fiscal year to determine the decline in their value for joint, sister or subsidiary projects, and for assets that are recorded in the books based on reevaluation. ...
International accounting standards require, in particular the impairment of (36) asset value standard No (31), re- evaluation of assets to display the value of fair value as the replacement value at the end of the period or fiscal year of the disclosure of assets, real value, the represent philosophy of accounting to relevant of different models to call the fair values, especially in case of using methodology - based pricing capital asset model. The researcher presented a model for measuring the impairment of the book value of assets form, which contributes to the measurement of accuracy of the fixed measurement of accounting income and taxable income help guide the preparation of financial statements in the presentation of fixed assets as fast as they converge with the fact that revenue and economic benefits of the asset in the financial period is ending. Because the accounting incases always different on taxable income for the application of the income tax act, although the act, to impose tax in net profit, which present the income statement prepared in accordance with the Egyptian accounting standards, but on grounds of maintaining the public revenues of ministerial decisions were issued contrary to that application and became the standard (31) can’t be applied when determining the tax base. Which led to a loss in its submission for income tax, which is a clear challenge, there is no application of some financial standards, which is what the researcher tried to show. He presented it to determine the tax impact of not applying the standard.
... 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. ...
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.
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.
In regulating the financial statements, the amortization of goodwill represents a complex problem that requires a careful assessment of the economic conditions of the firm and their foreseeable evolution. This study aimed to analyze the topic with specific regard to the Italian context, in order to identify the parameters useful for guiding the amortization processes, in compliance with the limits set by the legislation on financial statements. To this end, the study used a methodology based on the legal-economic analysis of the evolution of Italian legislation from 1882 to today and its effects on the economic valuations implied by amortization. The results show that the accounting for goodwill has changed over time, being characterized in the first phase by the prevalence of conservative accounting and by the consequent need to amortize goodwill in the shortest possible time. Subsequently, the accrual basis prevailed over conservatism, and today the basic rule is represented by the useful life of goodwill. The originality of this study lies in the multidisciplinary approach which, by combining the economic interpretation of the company with the legal rules on reporting, proposes an analysis model applicable in the practice of companies that prepare their financial statements according to the Civil Code.
