Intangible Assets, IFRS, and Analysts’ Earnings Forecasts

Abstract:     
We investigate whether the adoption of IFRS in 2005 by Australian firms has been associated with a loss of potentially useful information about intangible assets, as conjectured by Matolcsy and Wyatt (2006). We find that the negative association between analyst forecast error magnitude/dispersion and aggregate reported intangibles previously documented becomes stronger subsequent to IFRS adoption, primarily for firms with high levels of underlying intangible assets. This is contrary to Matolcsy and Wyatt (2006)’s conjecture. Our result is largely due to reported goodwill, rather than other intangible assets, suggesting that the impairment approach to goodwill valuation required by IFRS conveys more useful information than does the former straight-line amortisation approach. When we investigate a sub-sample of firms that report lower intangibles under IFRS than under the prior Australian GAAP, we do find evidence consistent with the Matolcsy and Wyatt (2006) conjecture.

Number of Pages in PDF File: 39

Keywords: IFRS, Analysts Forecasts, Intangible Assets

JEL Classification: M40, M41

Accepted Paper Series