Abstract

http://ssrn.com/abstract=1012139
 
 

References (23)



 
 

Citations (17)



 


 



Evidence on the Effects of Unverifiable Fair-Value Accounting


Karthik Ramanna


Harvard University - Harvard Business School

Ross L. Watts


Massachusetts Institute of Technology (MIT) - Sloan School of Management

August 31, 2007

Harvard Business School Working Paper No. 08-014

Abstract:     
SFAS 142 requires firms to use fair-value estimates to determine goodwill impairments. Watts (2003) and Ramanna (2007) argue the unverifiable nature of those fair-value estimates gives firms discretion to manage impairments. We test this argument in a sample of firms with market indications of impairment (firms with book goodwill and market-to-book ratio below one). We find that the frequency of non-impairment in this sample is about 71%, and that non-impairment is increasing in financial characteristics predicted to be associated with greater unverifiable fair-value-based discretion. To investigate whether non-impairment is associated with managers producing on average better estimates of goodwill than the market, we test whether non-impairment increases in industries with higher average information asymmetries. We fail to find evidence consistent with this proposition.

Number of Pages in PDF File: 60

Keywords: goodwill impairment, fair-value accounting, SFAS 142

JEL Classification: M41, M43, M44, G38, K22

working papers series





Download This Paper

Date posted: September 8, 2007  

Suggested Citation

Ramanna, Karthik and Watts, Ross L., Evidence on the Effects of Unverifiable Fair-Value Accounting (August 31, 2007). Harvard Business School Working Paper No. 08-014. Available at SSRN: http://ssrn.com/abstract=1012139 or http://dx.doi.org/10.2139/ssrn.1012139

Contact Information

Karthik Ramanna (Contact Author)
Harvard University - Harvard Business School ( email )
Morgan 389
Boston, MA 02163
United States
HOME PAGE: http://www.hbs.edu/kramanna
Ross L. Watts
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
E52-325
Cambridge, MA 02142
United States
Feedback to SSRN


Paper statistics
Abstract Views: 5,898
Downloads: 1,877
Download Rank: 4,001
References:  23
Citations:  17

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.484 seconds