Title: ASC 820 level 3 net assets and goodwill impairment losses

Authors: Christopher J. Skousen; Li Sun

Addresses: School of Accountancy, Huntsman School of Business, Utah State University, USA ' School of Accounting, Collins College of Business, University of Tulsa, USA

Abstract: Ramanna and Watts (2012) suggest that firms with more unverifiable or unobservable net assets have greater incentives to reduce goodwill impairment losses. This study complements Ramanna and Watts (2012) by providing an additional test in a unique setting because level 3 assets and liabilities under ASC 820 are unverifiable or unobservable in nature. Using 701 firm-year observations from 2008 to 2013, we document a significant and negative relation between level 3 net assets of acquiring firms and goodwill impairment losses, supporting Ramanna and Watts (2012).

Keywords: level 3 assets; level 3 liabilities; ASC 820; goodwill impairment; ASC 350-20; net assets.

DOI: 10.1504/IJEA.2016.079941

International Journal of Economics and Accounting, 2016 Vol.7 No.3, pp.250 - 264

Received: 09 Mar 2016
Accepted: 05 Jun 2016

Published online: 21 Oct 2016 *

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