TY - JOUR

T1 - Determinants of mandatory goodwill disclosure

T2 - The case of impairment testing in Germany

AU - Lazar, Laurent

AU - Velte, Patrick

PY - 2018

Y1 - 2018

N2 - Goodwill accounting standards, according to International Financial Reporting Standard 3 (IFRS 3) and International Accounting Standard 36 (IAS 36), oblige firms to describe the circumstances that form the basis of the annual impairment testing. We observe that managers’ interpretation and application of the IFRS is associated with the information content disclosed in financial statements. The use of boilerplate instead of firm-specific information decreases the information quality. This study investigates the disclosure quality of goodwill impairment testing according to IFRS of German listed companies between 2010 and 2015. Our results provide evidence that firm performance and goodwill impairment losses are positively linked to the quality of goodwill impairment disclosure. Furthermore, the results show that the magnitude of reported goodwill is negatively associated with the disclosure quality. Our findings are robust to additional tests and make several contributions to further research, regulation, and practice.

AB - Goodwill accounting standards, according to International Financial Reporting Standard 3 (IFRS 3) and International Accounting Standard 36 (IAS 36), oblige firms to describe the circumstances that form the basis of the annual impairment testing. We observe that managers’ interpretation and application of the IFRS is associated with the information content disclosed in financial statements. The use of boilerplate instead of firm-specific information decreases the information quality. This study investigates the disclosure quality of goodwill impairment testing according to IFRS of German listed companies between 2010 and 2015. Our results provide evidence that firm performance and goodwill impairment losses are positively linked to the quality of goodwill impairment disclosure. Furthermore, the results show that the magnitude of reported goodwill is negatively associated with the disclosure quality. Our findings are robust to additional tests and make several contributions to further research, regulation, and practice.

KW - Management studies

KW - Disclosure quality

KW - Germany

KW - Goodwill

KW - IAS 36

KW - Impairment only approach

KW - International Accounting Standard 36

KW - IOA

UR - http://www.scopus.com/inward/record.url?scp=85056372755&partnerID=8YFLogxK

U2 - 10.1504/IJMFA.2018.095941

DO - 10.1504/IJMFA.2018.095941

M3 - Journal articles

VL - 10

SP - 301

EP - 330

JO - International Journal of Managerial and Financial Accounting

JF - International Journal of Managerial and Financial Accounting

SN - 1753-6723

SN - 1753-6723

IS - 4

ER -