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An Examination of Disclosure Quality of Goodwill Impairment Testing in a Post-IFRS Environment - A Stakeholder Perspective


Tyrone M. Carlin


The University of Sydney Business School

Nigel Finch


The University of Sydney Business School

Guy Ford


Macquarie University - Graduate School of Management

November 2007

MGSM Working Paper No. 2007-14

Abstract:     
The adoption of IFRS based reporting in Australia for all reporting periods commencing 1 January 2005 onwards resulted in substantial variations to prior accepted reporting practices. One area in which change was particularly profound was in the shift to an impairment testing based regime for goodwill accounting and reporting. The IFRS framework requires substantially greater levels of disclosure about the assumptions brought to bear in sustaining a valuation for goodwill. At face value, this should have resulted in improved transparency and the availability of higher levels of decision useful information. However, a review of disclosures relating to goodwill and its impairment by a sample of large Australian reporting entities in the first year after the transition to IFRS suggests substantial room for improvement. In particular, required disclosures were frequently omitted, or suggested that the technical requirements of the IFRS goodwill impairment testing process had not been complied with. Consequently, it is concluded that at present, it is in exceptional cases rather than a matter of generality that IFRS compliant disclosures sustain improved insights and support better decision making by financial statement users.

Number of Pages in PDF File: 13

Keywords: Goodwill, Financial Reporting, Creative Accounting, Impairment Accounting

JEL Classification: M41, M44, M45, M48, G31

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Date posted: November 23, 2007  

Suggested Citation

Carlin, Tyrone M. and Finch, Nigel and Ford, Guy, An Examination of Disclosure Quality of Goodwill Impairment Testing in a Post-IFRS Environment - A Stakeholder Perspective (November 2007). MGSM Working Paper No. 2007-14 . Available at SSRN: http://ssrn.com/abstract=1031840 or http://dx.doi.org/10.2139/ssrn.1031840

Contact Information

Tyrone M. Carlin
The University of Sydney Business School ( email )
Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia
+ 61 2 9036 7230 (Phone)
+61 2 9351 7471 (Fax)
HOME PAGE: http://sydney.edu.au/business/staff/tyronec
Nigel Finch (Contact Author)
The University of Sydney Business School ( email )
Sydney
Australia
Guy Ford
Macquarie University - Graduate School of Management ( email )
99 Talavera Road
Sydney, NSW 2113
Australia
+61-2-9850-7813 (Phone)
+61-2-9850-9019 (Fax)
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