The impairment test of goodwill: an empirical analysis of incentives for earnings management in Italian publicly traded companies

摘要

Since the current International Accounting Standard 36 introducedsubstantial subjectivity while testing goodwill for impairment, thisstudy aims to establish if management exploits the discretion andperforms the impairment test of goodwill opportunistically. Thepresence of discretion, while applying impairment test, is tested onthe sample of Italian publicly traded companies in the period of thecurrent financial crisis. Despite the fact that the sample of companiesconsists of those with market to book ratio less than one, only 26% ofthe companies recorded a goodwill write-off. The logistic regressionwas used to test contracting and reporting incentives. The resultsof the analysis indicate that even in the case of IFRS users someincentives exist, while recognising the impairment losses of goodwill.