The information content of half-yearly goodwill impairment losses: analysis of the European context

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.