Is older goodwill value relevant?

Bugeja, Martin; Gallery, Natalie

doi:10.1111/j.1467-629x.2006.00181.x

Cited by 54 publications

(71 citation statements)

References 23 publications

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“…Our conclusions also reiterate the observation that goodwill relevant to equity valuation could depreciate rather rapidly (Bugeja and Gallery 2006), as, for instance, share price response to publicity of fines imposed for environmental offences in the UK, typically lasts up to 1 week after the publication (Lorraine et al 2004). Along these lines, we could conclude that the impact of the environmental disclosure is at best, short-lived and does not reflect significantly in the fiscal year-end valuations of companies.…”

Section: Discussionsupporting

confidence: 61%

The persistence of green goodwill

Sunderasan¹,

Singh²

2009

Environ Dev Sustain

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Civil coercion has its limitations, government regulation is only as effective as enforcement and investors base their estimates of firm value on information available from the firms themselves and from other sources. While voluntary disclosure is construed as being selective or incomplete, negative non-financial news such as details of fines imposed for environmental violation is reflected in lower stock prices for a short duration. This paper evaluates the persistence of goodwill capital for a sample of Indian companies from select industries, graded by their environmental performance. We conclude that investor concern differs across industries and that the correlation of environmental performance with firm valuation is, at best, weak and short-lived. Periodic scrutiny and announcement of industry environmental performance by appropriately equipped independent agencies could help coordinate and sustain stake-holder pressure on industry.

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Section: Discussionsupporting

confidence: 61%

The persistence of green goodwill

Sunderasan¹,

Singh²

2009

Environ Dev Sustain

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“…Moreover, for firms that engage in research and development, the goodwill note disclosures are not only value-relevant but also no less significant than recognised amounts. The finding that disclosed goodwill is value-relevant for firms engaged in R&D also indicates that, for these UK firms, relatively old goodwill retains its information value, in contrast to recent results on the ageing of goodwill using Australian data (Bugeja and Gallery, 2006). The next two sections review previous research and the regulatory background.…”

Section: Introductionmentioning

confidence: 86%

The Value-Relevance of Financial Statement Recognition versus Note Disclosure: Evidence from Goodwill Accounting

Jifri

Citron

2009

European Accounting Review

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The relative significance of financial statement recognition and note disclosure is an important issue for accounting regulators, preparers and auditors. While standard-setters prioritise financial recognition over disclosure, the empirical evidence on the value-relevance of note disclosures is mixed. This is partly due to the severe methodological problems inherent in comparing the two modes of presentation. This paper examines this issue in a new context by exploiting the UK regulatory environment where old pre-FRS 10 goodwill continues to be disclosed in the notes to the accounts at the same time as new post-FRS 10 goodwill is capitalised. It thus uses a within-firm research method to examine the relative significance of the two goodwill amounts. The analysis is based on a sample of 243 non-financial firms containing amounts of both recognised and disclosed goodwill in their 2002 financial statements. Both variables are significantly associated with share price. In addition, for firms engaging in R&D, there is no significant difference between the contributions of disclosed and recognised goodwill in explaining market value, a result consistent with the markets efficiently incorporating goodwill information irrespective of where it appears in the annual report.

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“…Specifically, Chauvin and Hirschey (1994), Jennings et al (1996) and McCarthy and Schneider (1995) find a strong positive association between goodwill and US firms' market value. Bugeja and Gallery (2006), Dahmash et al (2009) and Ritter and Wells (2006) conclude that Australian firms' market value is influenced positively by goodwill. Furthermore, Chalmers et al (2008) find that, overall, goodwill's value relevance was enhanced after the adoption of Australian IFRS equivalents in 2005 relative to Australian GAAP.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Goodwill under IFRS: Relevance and disclosures in an unfavorable environment

Baboukardos

Rimmel

2014

Accounting Forum

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The accounting treatment of purchased goodwill under IFRS has been severely criticized due to the extensive use of fair value accounting. The purpose of this study is to enrich the ongoing debate upon this issue by drawing attention to the market valuation implications of goodwill in a country outside the Anglo-Saxon accounting paradigm, where the application of fair value accounting has been seen as more problematic. The results indicate that, in the case of purchased goodwill, fair value accounting generates relevant accounting numbers but only in companies that comply highly with IFRS disclosure requirements.

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Is older goodwill value relevant?

Cited by 54 publications

References 23 publications

The persistence of green goodwill

The persistence of green goodwill

The Value-Relevance of Financial Statement Recognition versus Note Disclosure: Evidence from Goodwill Accounting

Goodwill under IFRS: Relevance and disclosures in an unfavorable environment

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