Accounting for Goodwill: What Factors Influence Management Preferences?

WP 98/014

45 Pages Posted: 4 Jan 1999

See all articles by Pelham Gore

Pelham Gore

Lancaster University

Fauziah M. Taib

University Sains Malaysia

Paul A. Taylor

Lancaster University

Abstract

This paper investigates factors that determined the position of senior managers of UK-listed companies in the heated debate surrounding proposals for a new standard on goodwill accounting, i.e. whether managers preferred the immediate write-off of goodwill to reserves or capitalisation and amortisation. Our results provide support for factors derived from contracting cost theory, including those associated with debt covenants and management compensation schemes, and transaction costs. However, we also find that perceived information effect factors, i.e. those based on managements' beliefs about the impact goodwill accounting would have on market perceptions of their companies, may constitute a stronger influence on their preferences.

JEL Classification: M41, M44

Suggested Citation

Gore, Pelham O. and Taib, Fauziah M. and Taylor, Paul Anthony, Accounting for Goodwill: What Factors Influence Management Preferences?. WP 98/014. Available at SSRN: https://ssrn.com/abstract=144608 or http://dx.doi.org/10.2139/ssrn.144608

Pelham O. Gore (Contact Author)

Lancaster University ( email )

Department of Accounting and Finance The Management School
Lancaster LA1 4YF
United Kingdom
+44 1524-593627 (Phone)
+44 1524-847321 (Fax)

Fauziah M. Taib

University Sains Malaysia ( email )

11800 Minden
School of Management
Penang
Malaysia
+604-6577888 (Phone)
+604-6577448 (Fax)

Paul Anthony Taylor

Lancaster University ( email )

The Management School
Lancaster LA1 4YX
United Kingdom
01524 593621 (Phone)
01524 84731 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1,340
Abstract Views
6,478
rank
14,819
PlumX Metrics