Determinants of mandatory goodwill disclosure: The case of impairment testing in Germany

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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.

Original languageEnglish
JournalInternational Journal of Managerial and Financial Accounting
Issue number4
Pages (from-to)301-330
Number of pages30
Publication statusPublished - 2018

    Research areas

  • Management studies
  • Disclosure quality, Germany, Goodwill, IAS 36, Impairment only approach, International Accounting Standard 36, IOA