Affiliation:
1. Technische Universität Darmstadt
Abstract
This study investigates whether goodwill impairments are influenced by earnings management incentives. It is motivated by the International Accounting Standards Board’s (IASB) post-implementation review on business combinations, the ongoing debate on the reliability of impairment testing, and the high practical relevance of this topic. The sample consists of 2,127 firm-year observations from German listed firms for the periods 2006 to 2013. The results show that the likelihood to recognize goodwill impairments and the magnitude of impairment losses are not only determined by economic and other relevant factors but also influenced by earnings management incentives like beating an earnings target, conservative smoothing, big bath accounting, changes in senior management, and the firms’ general earnings management behavior. Hence, goodwill impairment tests seem to be used by management as a device for earnings management. The results do not change over time, i.e., between the period before, during, and after the financial crisis.
Subject
General Business, Management and Accounting
Reference79 articles.
1. AbuGhazaleh, N. M., Al-Hares, O. M., & Roberts, C. (2011). Accounting discretion in goodwill impairments: UK evidence. Journal of International Financial Management and Accounting, 22(3), 165-204. https://doi.org/10.5465/amr.2002.5922314
2. Alciatore, M., Dee, C. C., Easton, P., & Spear, N. (1998). Asset write-downs: A decade of research. Journal of Accounting Literature, 17, 1-39.
3. Avallone, F., & Quagli, A. (2015). Insight into the variables used to manage the goodwill impairment test under IAS 36. Advances in Accounting, 31(1), 107-114. https://doi.org/10.1016/j.adiac.2015.03.011
4. Barth, M. E., Elliott, J. A., & Finn, M. W. (1999). Market rewards associated with patterns of increasing earnings. Journal of Accounting Research, 37(2), 387-413. https://doi.org/10.2307/2491414
5. Bartov, E., Gul, F., & Tsui, J. (2001). Discretionary-accruals models and audit qualifications. Journal of Accounting and Economics, 30(3), 421-452. https://doi.org/10.1016/S0165-4101(01)00015-5
Cited by
3 articles.
订阅此论文施引文献
订阅此论文施引文献，注册后可以免费订阅5篇论文的施引文献，订阅后可以查看论文全部施引文献