Manager’s misinterpretation of goodwill impairments: Evidence from German listed companies

Research output: Journal contributionsJournal articlesResearchpeer-review


This study investigates the reported goodwill of German listed companies between 2009 and 2014 and focuses on opportunistic behaviour by managers applying the impairment only approach (IOA) in accordance with IAS 36. Contributing to the literature on goodwill accounting, this investigation examines changes of CEOs and companies’ financial situation, showing that the profit trend is an indicator of goodwill impairments. The results also indicate that new CEOs show a tendency for big bath accounting when taking office and therefore write off more goodwill than incumbent CEOs. Moreover, managers are more likely to impair goodwill when current earnings are negative, especially after decreases in earnings above the annual average. On the other hand, managers tend to avoid goodwill impairments when earnings decrease significantly but still remain positive.

Original languageEnglish
JournalInternational Journal of Accounting, Auditing and Performance Evaluation
Issue number2
Pages (from-to)168-190
Number of pages23
Publication statusPublished - 2019

    Research areas

  • Big bath accounting, Earnings management, Goodwill, IAS 36, Impairment only approach, Income smoothing, IOA
  • Management studies