Towards an Understanding of the Phases of Goodwill Accounting in Four Western Capitalist Countries: From Stakeholder Model to Shareholder Model

Abstract

The objective of this paper is to illustrate that the change in shareholders' attitude towards firms (from stakeholder model to shareholder model) influences the accounting treatments of goodwill. Our study is based on four countries (Great Britain, the United States, Germany, and France) and covers more than a century, starting in 1880. We explain that all these countries have gone through four identified phases of goodwill accounting, classified as (1) "static" (immediate or rapid expensing), (2) "weakened static" (write-off against equity), (3) "dynamic" (recognition with amortization over a long period) and (4) "actuarial" (recognition without amortization but with impairment if necessary). We contribute several new features to the existing literature on goodwill: our study (1) is international and comparative, (2) spans more than a century, (3) uses the stakeholder/shareholder models to explain the evolution in goodwill treatment in the four countries studied. More precisely, it relates a balance sheet theory, which distinguishes four phases in accounting treatment for goodwill, to the shift from a stakeholder model to a shareholder model, which leads to the preference for short-term rather than long-term profit, (4) contributes to the debate on whether accounting rules simply reflect or arguably help to produce the general trend towards the shareholder model, (5) demonstrates a "one-way" evolution of goodwill treatment in the four countries studied, towards the actuarial phase.

Development of methods for analyzing the economic activities of legal service enterprises

“…Without connections with consumers, even the best specialists will not be able to implement their competence, therefore, the technology of interaction with consumers is also a firm's capital, which is expressed in its reputation. Reputational resources are the most difficult to assess, despite the fact that quite a lot of attention has been paid to them recently and various approaches to accounting and analysis of this type of assets are being developed [9], [10], [11], [17], [19], [21], [26], [33].…”

Hyman Minsky’s Financial Instability Hypothesis and the Accounting Structure of Economy

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