Purpose: The aim of the paper is to investigate earnings management practices related to goodwill accounting, focusing on its first recognition as well as its write-offs, due to the impairment test. Design/methodology/approach: The study refers to a sample of Italian listed firms and the analysis covers three years, with a total of 591 firm-year observations. The modified Jones’ regression model has been used in estimating discretionary accruals, as a proxy of earnings management practices. Findings: A positive relationship between discretionary accruals and yearly changes in goodwill has been proved. Findings also show an incidence of leverage and performance. Research limitations/implications: The study focuses on a single context (Italy) and it is essentially based on financial-economic variables. Practical implications: Findings of the study could be relevant for standard-setters in future revisions of goodwill accounting. Social implication: The study could support investors in evaluating the incidence of first recognition as well as goodwill impairment on the quality of earnings.
Goodwill and accounting discretion
BISOGNO, Marco
2015
Abstract
Purpose: The aim of the paper is to investigate earnings management practices related to goodwill accounting, focusing on its first recognition as well as its write-offs, due to the impairment test. Design/methodology/approach: The study refers to a sample of Italian listed firms and the analysis covers three years, with a total of 591 firm-year observations. The modified Jones’ regression model has been used in estimating discretionary accruals, as a proxy of earnings management practices. Findings: A positive relationship between discretionary accruals and yearly changes in goodwill has been proved. Findings also show an incidence of leverage and performance. Research limitations/implications: The study focuses on a single context (Italy) and it is essentially based on financial-economic variables. Practical implications: Findings of the study could be relevant for standard-setters in future revisions of goodwill accounting. Social implication: The study could support investors in evaluating the incidence of first recognition as well as goodwill impairment on the quality of earnings.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
