The Value-Relevance of Financial Statement Recognition versus Note Disclosure: Evidence from Goodwill Accounting
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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 18 (2009)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/REAR20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/REAR20|
When requesting a correction, please mention this item's handle: RePEc:taf:euract:v:18:y:2009:i:1:p:123-140. 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: (Michael McNulty)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.