Goodwill Valuation Effects of the Initial Adoption of SFAS 142
University of Waterloo - School of Accounting and Finance
Mark J. Kohlbeck
Florida Atlantic University - School of Accounting
University of Wisconsin - Wisconsin School of Business
April 1, 2004
We investigate the initial adoption of Statement of Financial Accounting Standards no. 142, Goodwill and Other Intangible Assets, (SFAS 142). Using a sample of firms reporting goodwill at yearend 2001, we provide evidence on the timeliness and value relevance of the reported goodwill and goodwill impairments subsequent to the adoption of SFAS 142. Our results indicate that the adoption impairment was partially impounded in prices prior to 2002 and also represented new information to the market in 2002. The subsequent year 1 impairment primarily provides new information to the market (although some of the impairment is anticipated in the prior year). We also report increased value relevance associated with the adoption of SFAS 142. Our evidence documents a net benefit associated with SFAS 142 and is consistent with the FASB's objectives in promulgating the new standard.
Number of Pages in PDF File: 34
Keywords: Goodwill, impairment, valuation
JEL Classification: M41, M45, G12working papers series
Date posted: April 22, 2004 ; Last revised: February 9, 2010
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