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The Value-Relevance of Financial Statement Recognition versus Note Disclosure: Evidence from Goodwill Accounting


  • Khaled Al Jifri
  • David Citron


The relative significance of financial statement recognition and note disclosure is an important issue for accounting regulators, preparers and auditors. While standard-setters prioritise financial recognition over disclosure, the empirical evidence on the value-relevance of note disclosures is mixed. This is partly due to the severe methodological problems inherent in comparing the two modes of presentation. This paper examines this issue in a new context by exploiting the UK regulatory environment where old pre-FRS 10 goodwill continues to be disclosed in the notes to the accounts at the same time as new post-FRS 10 goodwill is capitalised. It thus uses a within-firm research method to examine the relative significance of the two goodwill amounts. The analysis is based on a sample of 243 non-financial firms containing amounts of both recognised and disclosed goodwill in their 2002 financial statements. Both variables are significantly associated with share price. In addition, for firms engaging in R&D, there is no significant difference between the contributions of disclosed and recognised goodwill in explaining market value, a result consistent with the markets efficiently incorporating goodwill information irrespective of where it appears in the annual report.

Suggested Citation

  • Khaled Al Jifri & David Citron, 2009. "The Value-Relevance of Financial Statement Recognition versus Note Disclosure: Evidence from Goodwill Accounting," European Accounting Review, Taylor & Francis Journals, vol. 18(1), pages 123-140.
  • Handle: RePEc:taf:euract:v:18:y:2009:i:1:p:123-140
    DOI: 10.1080/09638180802324351

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    Cited by:

    1. repec:eee:advacc:v:29:y:2013:i:2:p:312-331 is not listed on IDEAS
    2. Carmen- Alexandra BALTARIU, 2015. "The Current State Of Knowledge In The Value Relevance Research Field," SEA - Practical Application of Science, Fundația Română pentru Inteligența Afacerii, Editorial Department, issue 7, pages 13-20, April.
    3. repec:eee:accfor:v:38:y:2014:i:1:p:1-17 is not listed on IDEAS
    4. repec:eee:jiaata:v:29:y:2017:i:c:p:118-126 is not listed on IDEAS
    5. Baschieri, Giulia & Carosi, Andrea & Mengoli, Stefano, 2016. "Does the earnings quality matter? Evidence from a quasi-experimental setting," Finance Research Letters, Elsevier, vol. 19(C), pages 146-157.
    6. Isabel Lourenço & Jeffrey Callen & Manuel Branco & José Curto, 2014. "The Value Relevance of Reputation for Sustainability Leadership," Journal of Business Ethics, Springer, vol. 119(1), pages 17-28, January.
    7. repec:bla:abacus:v:53:y:2017:i:1:p:28-58 is not listed on IDEAS
    8. Rute Gonçalves & Patrícia Lopes, 2015. "Value-Relevance of Biological Assets under IFRS," FEP Working Papers 556, Universidade do Porto, Faculdade de Economia do Porto.
    9. Francesco Avallone & Claudia Gabbioneta & Paola Ramassa & Marco Sorrentino, 2015. "Why Do Firms Write Off Their Goodwill? A Comparison of Different Accounting Systems," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2015(1), pages 23-40.

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