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Amortisation Versus Impairment of Goodwill and Accounting Quality

Author

Listed:
  • Paul Van Hulzen

    (Amsterdam Business School, University of Amsterdam, Plantage Muidergracht 12, Amsterdam 1018TV, The Netherlands)

  • Laura Alfonso

    (Amsterdam Business School, University of Amsterdam, Plantage Muidergracht 12, Amsterdam 1018TV, The Netherlands)

  • Georgios Georgakopoulos

    () (Amsterdam Business School, University of Amsterdam, Plantage Muidergracht 12, Amsterdam 1018TV, The Netherlands)

  • Ioannis Sotiropoulos

    (Department of Finance and Auditing, TEI of Epirus, Psathaki, Preveza, PC 48100, Greece)

Abstract

In this paper there has been made a comparison between the amortisation and the impairment methods for accounting for goodwill, with regards to their associated effects on accounting quality. Based on two qualitative characteristics of accounting information, as formulated by the International Accounting Standards Board (IASB), the effects of the new impairment method are examined using a value relevance and a timeliness model. The sample consists of European companies that adopted this new method of goodwill accounting, following the required adoption of the International Financial Reporting Standards (IFRS) in 2005. The results indicate that impairment of goodwill is actually less value relevant than amortisation, but that it does lead to more timely accounting information. It is concluded that the objective of the IASB in issuing a new accounting standard is not completely met and it only partially contributes to higher accounting quality.

Suggested Citation

  • Paul Van Hulzen & Laura Alfonso & Georgios Georgakopoulos & Ioannis Sotiropoulos, 2011. "Amortisation Versus Impairment of Goodwill and Accounting Quality," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 4(3), pages 93-118, December.
  • Handle: RePEc:tei:journl:v:4:y:2011:i:3:p:93-118
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    File URL: http://ijbesar.teiemt.gr/docs/volume4_issue3/amortisation.pdf
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    File URL: http://ijbesar.teiemt.gr/volume4_issue3.php
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    References listed on IDEAS

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    1. repec:bla:joares:v:30:y:1992:i:2:p:185-209 is not listed on IDEAS
    2. Lapointe-Antunes, Pascale & Cormier, Denis & Magnan, Michel, 2009. "Value relevance and timeliness of transitional goodwill-impairment losses: Evidence from Canada," The International Journal of Accounting, Elsevier, vol. 44(1), pages 56-78, March.
    3. repec:bla:joares:v:37:y:1999:i:2:p:353-385 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Nicola Giuseppe Castellano & Katia Corsi & Roberto Del Gobbo, 2015. "Goodwill Disclosure in Europe. Profiles of disclosing companies," Eastern European Business and Economics Journal, Eastern European Business and Economics Studies Centre, vol. 1(2), pages 32-65.
    2. Markéta Boučková, 2016. "Quality of Disclosed Information with Emphasis on Goodwill Impairment," European Financial and Accounting Journal, University of Economics, Prague, vol. 2016(2), pages 37-52.
    3. Atanasov, Atanas, 2017. "Счетоводното Регламентиране На Репутацията В България – Исторически Преглед И Анализ
      [The Accounting Regulation of Goodwill in Bulgaria – Historical Overview and Analysis]
      ," MPRA Paper 85616, University Library of Munich, Germany.
    4. repec:eeb:15v1n2:v:1:y:2015:i:2:p:32-65 is not listed on IDEAS

    More about this item

    Keywords

    Amortisation; impairment; goodwill; value relevance; timeliness;

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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