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Amortisation Versus Impairment of Goodwill and Accounting Quality

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Author Info

  • Paul Van Hulzen

    (Amsterdam Business School, University of Amsterdam, Plantage Muidergracht 12, Amsterdam 1018TV, The Netherlands)

  • Laura Alfonso

    (Amsterdam Business School, University of Amsterdam, Plantage Muidergracht 12, Amsterdam 1018TV, The Netherlands)

  • Georgios Georgakopoulos

    ()
    (Amsterdam Business School, University of Amsterdam, Plantage Muidergracht 12, Amsterdam 1018TV, The Netherlands)

  • Ioannis Sotiropoulos

    (Department of Finance and Auditing, TEI of Epirus, Psathaki, Preveza, PC 48100, Greece)

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    Abstract

    In this paper there has been made a comparison between the amortisation and the impairment methods for accounting for goodwill, with regards to their associated effects on accounting quality. Based on two qualitative characteristics of accounting information, as formulated by the International Accounting Standards Board (IASB), the effects of the new impairment method are examined using a value relevance and a timeliness model. The sample consists of European companies that adopted this new method of goodwill accounting, following the required adoption of the International Financial Reporting Standards (IFRS) in 2005. The results indicate that impairment of goodwill is actually less value relevant than amortisation, but that it does lead to more timely accounting information. It is concluded that the objective of the IASB in issuing a new accounting standard is not completely met and it only partially contributes to higher accounting quality.

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    File URL: http://www.ijesar.org/docs/volume4_issue3/amortisation.pdf
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    File URL: http://www.ijesar.org/volume4_issue3.php
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    Bibliographic Info

    Article provided by Technological Educational Institute (TEI) of Kavala, Greece in its journal International Journal of Economic Sciences and Applied Research (IJESAR).

    Volume (Year): 4 (2011)
    Issue (Month): 3 (December)
    Pages: 93-118

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    Handle: RePEc:tei:journl:v:4:y:2011:i:3:p:93-118

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    Related research

    Keywords: Amortisation; impairment; goodwill; value relevance; timeliness;

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    1. Lapointe-Antunes, Pascale & Cormier, Denis & Magnan, Michel, 2009. "Value relevance and timeliness of transitional goodwill-impairment losses: Evidence from Canada," The International Journal of Accounting, Elsevier, vol. 44(1), pages 56-78, March.
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