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

MGSM Working Paper No. 2007-14

13 Pages Posted: 23 Nov 2007  

Tyrone M. Carlin

The University of Sydney Business School

Nigel Finch

Saki Partners

Guy Ford

Macquarie University - Graduate School of Management

Date Written: November 2007

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.

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

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

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: https://ssrn.com/abstract=1031840 or http://dx.doi.org/10.2139/ssrn.1031840

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)

Saki Partners ( email )

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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