Transparent financial disclosure and SFAS No. 142

Abstract

Purpose -This paper seeks to examine whether companies are providing transparent financial disclosures in compiling with the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets", and to determine whether the adequacy of these disclosures is impacted by firm size. Design/methodology/approach -The authors conducted a random sample of companies that reported goodwill impairments for the first year of adoption of SFAS No. 142. The firms were then stratified into three groups according to asset size. Subsequent analysis consisted of assessing the financial transparency of companies' goodwill reporting practices in total and by firm size, utilizing an approach suggested in Adams. Findings -The study's findings suggest that many companies are not willing to provide additional voluntary disclosures to improve financial transparency, despite having the necessary information easily accessible. It also found that compliance with the provisions of SFAS 142 was sporadic and unpredictable.Originality/value -This study provides evidence that companies are not providing transparent financial information.

Goodwill Accounting in Malaysia and the Transition to IFRS – A Compliance Assessment of Large First Year Adopters

“…In particular, the highly prescriptive disclosure requirements pertaining to the nature of goodwill impairment testing processes undertaken by reporting entities provides far greater transparency than has previously been the case (Sevin et al, 2007). The opportunity for greater transparency inherent in the design of FRS 136 is contingent on the navigation, on the part of preparers and auditors through a highly complex reporting regime.…”

The Significance of Intangibles: A Comparative Analysis Between Croatia, Slovenia, Czech Republic, Germany and the USA

“…Just by disclosing more information about non-recognized intangibles, the information asymmetry between recognized and non-recognized intangibles will be eliminated. Recent researches suggest that the lack of information provided by preparers of financial accounts shell be improved (Sevin, Schroeder andBhamornsiri, 2007, Gerpott et al, 2008). Kristensen and Westlund (2003) believe that it is crucial to understand the gap between market and book value, which is linked with incomplete information about intangibles.…”

Fair value accounting: virtues and vices

“…For instance, one could allocate goodwill among reporting units in such manner as to achieve a predestined level of impairment, if any. Disclosures under FAS 141 and 142 were also found to be 'sporadic' and voluntary disclosure to augment the statutory requirements were literally non-existent (Sevin et al, 2007;Sevin and Schroeder, 2005). Disclosures under FAS 141 and 142 were also found to be 'sporadic' and voluntary disclosure to augment the statutory requirements were literally non-existent (Sevin et al, 2007;Sevin and Schroeder, 2005).…”