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A Note on the Determinants of IFRS Policy Choice When Accounting for Non‐controlling Interest and Goodwill

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  • Matilda Hellman Aasen
  • Niclas Hellman
  • Tomas Hjelström
  • Jasmina T. White

Abstract

This paper provides evidence on the choices made by European firms when measuring non‐controlling interest (NCI) and goodwill. Since 2009, IFRS 3 allows measurement of NCI either at fair value (full goodwill method) or at the proportionate share of net assets (partial goodwill method). IFRS 3 allows this policy choice on a per transaction basis. Our data comprise 188 hand‐collected firm choices in connection with business combinations with remaining NCI, between 2010 and 2016. We use the theoretical framework developed by Stadler and Nobes (2014) explaining differences in firms’ choices of overt accounting options by country, industry, and firm‐specific topic factors. Based on univariate and multivariate analyses, we find that transaction‐specific and firm‐specific topic factors influence accounting policy choice, whereas country and industry factors do not. The choice has different effects on financial leverage and operating returns, which inform firm‐level preferences. Regarding choices made at the transaction level, we find acquirers with an intention to buy additional shares from non‐controlling shareholders tend to prefer the full goodwill method. Thus, the choice of accounting method conveys information to users about future additional acquisitions and has implications for standard setters, indicating that offering choices at transaction level may increase the forward‐looking content of financial statements.

Suggested Citation

  • Matilda Hellman Aasen & Niclas Hellman & Tomas Hjelström & Jasmina T. White, 2026. "A Note on the Determinants of IFRS Policy Choice When Accounting for Non‐controlling Interest and Goodwill," Abacus, Accounting Foundation, University of Sydney, vol. 62(1), pages 310-335, March.
    • Handle: RePEc:bla:abacus:v:62:y:2026:i:1:p:310-335
    DOI: 10.1111/abac.12350
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    References listed on IDEAS

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    1. Haller, Axel & Wehrfritz, Martin, 2013. "The impact of national GAAP and accounting traditions on IFRS policy selection: Evidence from Germany and the UK," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 22(1), pages 39-56.
    2. Cairns, David & Massoudi, Dianne & Taplin, Ross & Tarca, Ann, 2011. "IFRS fair value measurement and accounting policy choice in the United Kingdom and Australia," The British Accounting Review, Elsevier, vol. 43(1), pages 1-21.
    3. Walkling, Ralph A., 1985. "Predicting Tender Offer Success: A Logistic Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(4), pages 461-478, December.
    4. Niclas Hellman & Sidney J. Gray & Richard D. Morris & Axel Haller, 2015. "The persistence of international accounting differences as measured on transition to IFRS," Accounting and Business Research, Taylor & Francis Journals, vol. 45(2), pages 166-195, February.
    5. Anja Hjelström & Walter Schuster, 2011. "Standards, Management Incentives and Accounting Practice -- Lessons from the IFRS Transition in Sweden," Accounting in Europe, Taylor & Francis Journals, vol. 8(1), pages 69-88, June.
    6. Richard D. Morris & Isabel Gordon, 2006. "Equity accounting adoption in regulated and unregulated settings: an empirical study," Abacus, Accounting Foundation, University of Sydney, vol. 42(1), pages 22-42, March.
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