Early Impressions of Australia's Brave New World of Goodwill Impairment

Abstract

The 2006 reporting year represents the first year in which substantial quantities of financial statements prepared by Australian listed corporations in accordance with the requirements of A-IFRS have become available for inspection.

It is the purpose of this paper to develop an impression of the manner in which the Australian goodwill reporting regime, AASB 136 - Impairment of Assets, has unfolded in this initial implementation period. This research focuses on the elections and disclosures made by the 20 largest Australian listed corporations and focuses on the development of a more nuanced comprehension of the degree of conservatism or aggression inherent in value in use estimates employed in their determination of impairment.

Several dimensions of the goodwill reporting regime are investigated including, the role of cash generating units (CGU), the estimation of the recoverable amounts of CGU assets, and other key factors such as discount rates, growth rates, forecast periods and terminal values.

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

JEL Classification: M41, G31