The value-relevance of goodwill reported under IFRS 3 versus IAS 22

摘要

The application of International Financial Reporting Standard (IFRS) 3, which becamecompulsory for financial periods beginning on or after 31 March 2004, significantlychanged the initial and subsequent measurement of goodwill in annual reports. Thischange in the accounting treatment of goodwill was not universally accepted andthere has been ongoing debate around the efficacy of the new goodwill treatment.This study uses a revised Ohlson-type value-relevance model (Ohlson, 1995) toexamine the association between the goodwill balance reported and the market valueof a company before and after the introduction of IFRS 3. The findings show that thegoodwill balance reported according to IFRS 3 provides information that is morevalue-relevant than the previous International Accounting Standard (IAS) 22treatment. In the light of the ongoing debate around the accounting treatment ofgoodwill, this study provides regulators and researchers with valuable information tofurther assess the efficacy of the IFRS 3 goodwill treatment.