Goodwill has been in the focus of interest of academics and practitioners for many years now. Research interest has been fuelled by its discretionary nature, the large amounts of its write- downs combined with adverse impact potential on financial statements and loopholes in accounting regulations. This thesis includes three empirical essays on the causes and impact of goodwill impairment write-downs. Its overall objective is to provide a more insightful and comprehensive understanding of the goodwill impairment process. The first empirical essay explores the role of goodwill write-downs in .the rating assessment process. It aims to uncover rating agencies' perception of goodwill using an accounting predictive model on ex post basis and comparing accounting treatments of goodwill as currently or recently applicable under UK GAAP. Results suggest that raters ignore goodwill and its write-downs in their annual rating analyses. While this evidence is consistent with pre- FRS 10 business reality in the UK, it raises questions about the efficiency of impairment regulations on national and international level. The second empirical essay investigates managerial choices related to goodwill impairment in the UK. Findings suggest that while managers are likely to base the decision whether to impair goodwill on financial performance indicators, they might adjust the amount of the impairment charge at their discretion for reporting purposes. The third empirical essay investigates two of the drivers of financial performance (industrial regulation and competition) and their relation to goodwill using a case study approach. The evidence suggests that these two phenomena could provide an early warning indicator to regulators, auditors and financial statement users about goodwill impairment potential of the individual firm or an industry sector. Furthermore, the room for managerial discretion provided by the discount rates in the impairment calculation is explored. Results show that discount rates can be adjusted using commonly accepted parameters in practice to justify a wide range of discount rates and, consequently, a variety of impairment opportunities at the discretion of management.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:551686 |
| Date | January 2011 |
| Creators | Brutting, Milena |
| Publisher | City University London |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://openaccess.city.ac.uk/1192/ |
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