Economic Consequences of SFAS 142 Goodwill Write‐Offs

25 Pages Posted: 4 Mar 2014

See all articles by Henry Jarva

Henry Jarva

Aalto University - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: March 2014


This paper examines the economic consequences of goodwill write‐offs under Statement of Financial Accounting Standards No. 142 (SFAS 142). Although write‐off firms have performed poorly, it is evident that deteriorating economic performance explains only a small proportion of write‐offs. After controlling for endogeneity of write‐off choice, I fail to find evidence that investors and analysts fixate on SFAS 142 goodwill write‐offs. I also provide evidence that write‐off firms pay higher audit fees, suggesting that auditors charge higher fees in response to extra audit effort. These results are consistent with the principles of market efficiency, analyst‐forecast rationality and efficient audit pricing.

Keywords: Audit fees, Conditional conservatism, Fair‐value accounting, Market efficiency, Propensity score matching

JEL Classification: G14, M41, M48

Suggested Citation

Jarva, Henry, Economic Consequences of SFAS 142 Goodwill Write‐Offs (March 2014). Accounting & Finance, Vol. 54, Issue 1, pp. 211-235, 2014, Available at SSRN: or

Henry Jarva (Contact Author)

Aalto University - School of Business ( email )

P.O. Box 21210
AALTO, FI-00076

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