IDEAS home Printed from
   My bibliography  Save this article

The Information Content of Goodwill-Impairments under FAS 142: Implications for External Analysis and Internal Control


  • Wolfgang Schultze


With its standards FAS 141 and 142 the Financial Accounting Standard Board has revolution-ized the accounting for business combinations. One of the major changes is the abolishment of goodwill-amortization, which has been replaced by an annual impairment test at the level of a reporting unit. Among other things, this new regulation is intended to improve the infor-mation content of goodwill accounting. This paper investigates into the information content of such an impairment from the perspective of external or internal financial analysis. I examine how impairment losses resulting from FAS 142 should be interpreted and treated in the inter-nal and external performance analysis. My analysis shows that an impairment can be due to several reasons, not just to a deteriorating economic performance. In particular, the way the impairment test is conducted according to FAS 142 may even lead to a discrimination of eco-nomically viable investment projects.

Suggested Citation

  • Wolfgang Schultze, 2005. "The Information Content of Goodwill-Impairments under FAS 142: Implications for External Analysis and Internal Control," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 57(3), pages 276-297, July.
  • Handle: RePEc:sbr:abstra:v:57:y:2005:i:3:p:276-297

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Tami Dinh Thi & Wolfgang Schultze, 2011. "Capitalizing research & development and ‘other information’: the incremental information content of accruals versus cash flows," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 22(3), pages 241-278, November.
    2. Andreas Haaker, 2007. "Wertorientierte Kontrolle und Abweichungsanalyse auf Basis des Goodwill-Impairment-Tests nach IFRS," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 18(1), pages 83-108, April.
    3. Jean-Michel Sahut & Sandrine Boulerne & Frédéric Teulon, 2011. "Do IFRS provide better information about intangibles in Europe?," Review of Accounting and Finance, Emerald Group Publishing, vol. 10(3), pages 267-290, August.
    4. Jerman Mateja & Manzin Massimo, 2008. "Accounting Treatment of Goodwill in IFRS and US GAAP," Organizacija, De Gruyter Open, vol. 41(6), pages 218-225, November.
    5. Wolfgang Schultze & Andreas Weiler, 2007. "Performancemessung und Wertgenerierung: Entlohnung auf Basis des Residualen Ökonomischen Gewinns," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 18(2), pages 133-159, August.
    6. Wolfgang Schultze & Andreas Weiler, 2010. "Goodwill accounting and performance measurement," Managerial Finance, Emerald Group Publishing, vol. 36(9), pages 768-784, August.
    7. Sandrine Boulerne & Jean-Michel Sahut, 2010. "Les normes IFRS ont-elles amélioré le contenu informationnel des immatériels ? Le cas des entreprises françaises cotées," Comptabilité - Contrôle - Audit, Association francophone de comptabilité, vol. 16(1), pages 7-32.

    More about this item


    Financial Statement Analysis; Goodwill; Impairment; Internal Control; Perform-ance Measurement.;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sbr:abstra:v:57:y:2005:i:3:p:276-297. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (sbr). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.