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On the Allocation of a Takeover Purchase Price under AASB1013


  • Kieran James

    () (School of Accounting, Economics and Finance, Faculty of Business and Law, University of Southern Queensland, West Street Toowomba, QLD 4350, Australia)

  • Janice How

    (Economics and Finance, Queensland University of Technology Business School, GPO Box 2434, Brisbane, QLD 4001, Australia)

  • Peter Verhoeven

    (Economics and Finance, Queensland University of Technology Business School, GPO Box 2434, Brisbane, QLD 4001, Australia)


The purpose of this paper is to document and explain the allocation of takeover purchase price to identifiable intangible assets (IIAs), purchased goodwill, and/or target net tangible assets in an accounting environment unconstrained with respect to IIA accounting policy choice. Using a sample of Australian acquisitions during the unconstrained accounting environment from 1988 to 2004, we find the percentage allocation of purchase price to IIAs averaged 19.09%. The percentage allocation to IIAs is significantly positively related to return on assets and insignificantly related to leverage, contrary to opportunism. Efficiency suggests an explanation: profitable firms acquire and capitalise a higher percentage of IIAs in acquisitions. The target's investment opportunity set is significantly positively related to the percentage allocation to IIAs, consistent with information-signaling. The paper contributes to the accounting policy choice literature by showing how Australian firms make the one-off accounting policy choice in regards allocation of takeover purchase price (which is often a substantial dollar amount to) in an environment where accounting for IIAs was unconstrained.

Suggested Citation

  • Kieran James & Janice How & Peter Verhoeven, 2011. "On the Allocation of a Takeover Purchase Price under AASB1013," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 7(2), pages 1-34.
  • Handle: RePEc:usm:journl:aamjaf00702_1-34

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