6533b82efe1ef96bd12945c8

RESEARCH PRODUCT

Changes in the value relevance of goodwill accounting following the adoption of IFRS 3

Leif Atle BeislandMattias Hamberg

subject

Amortization (business)business.industryAccountingFair valueGoodwillAccountingBusinessFinanceStock (geology)

description

Abstract This study examines the value relevance effects of changes in goodwill accounting in a European setting. International Financial Reporting Standard (IFRS) 3 replaced accounting rules that emphasized goodwill amortization over short useful lives which kept goodwill balances low. Goodwill accounting under IFRS 3 largely relies on manager fair value estimates of acquired business units. Using Swedish data, we show that goodwill amortizations were not value-relevant prior to the adoption of IFRS 3. However, impairments reported in addition to amortization were significantly related to stock returns during that period. In contrast, under the impairment-only regime prescribed by IFRS 3, impairments are no longer statistically related to stock returns.

yearjournalcountryeditionlanguage
2014-01-01Journal of International Accounting, Auditing and Taxation
https://doi.org/10.1016/j.intaccaudtax.2014.07.002