Goodwill Impairment Test Disclosures under IAS 36: Compliance and Disclosure Quality, Disclosure Determinants, and the Role of Enforcement

Corporate Ownership & Control, Vol. 16 (2018), pp. 145-167.

23 Pages Posted: 28 Jul 2015 Last revised: 11 Jan 2019

See all articles by Marius Gros

Marius Gros

Niederrhein University of Applied Sciences; Goethe University Frankfurt - Department of Accounting and Auditing

Sebastian Koch

Goethe University Frankfurt - Department of Accounting and Auditing

Date Written: January 20, 2018

Abstract

Prior research documented that higher disclosure quality reduces information asymmetry and cost of capital. Accordingly, firms have an incentive to comply with disclosure requirements and to provide voluntary disclosure. However, prior research on mandatory disclosures on goodwill impairment testing reveals low compliance among European firms. In this paper, we contribute to the literature and assist regulators, enforcers and standard setters by shedding light on the determinants of the observed low levels of compliance and voluntary disclosure. Consistent with economic theory, we reveal that firms determine the level of disclosure stra-tegically. We find firms with higher preparation and proprietary cost to show lower compli-ance and less voluntary disclosure while firms with higher growth opportunities provide better compliance and more voluntary disclosure. However, the strategic behavior is constrained by enforcement. Consequently, our results are more (less) pronounced within a weak (strong) enforcement environment.

Keywords: IFRS, Goodwill, IAS 36, Disclosure, Enforcement, Notes

JEL Classification: M41, M48

Suggested Citation

Gros, Marius F. and Koch, Sebastian, Goodwill Impairment Test Disclosures under IAS 36: Compliance and Disclosure Quality, Disclosure Determinants, and the Role of Enforcement (January 20, 2018). Corporate Ownership & Control, Vol. 16 (2018), pp. 145-167., Available at SSRN: https://ssrn.com/abstract=2636792 or http://dx.doi.org/10.2139/ssrn.2636792

Marius F. Gros

Niederrhein University of Applied Sciences ( email )

Germany

Goethe University Frankfurt - Department of Accounting and Auditing ( email )

Theodor-W.-Adorno-Platz 1
60323 Frankfurt
Germany

Sebastian Koch (Contact Author)

Goethe University Frankfurt - Department of Accounting and Auditing ( email )

Theodor-W.-Adorno Platz 4
60323 Frankfurt
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
510
Abstract Views
2,397
rank
69,098
PlumX Metrics