Title: Determinants of mandatory goodwill disclosure: the case of impairment testing in Germany

Authors: Laurent Lazar; Patrick Velte

Addresses: Institute of Finance and Accounting, Leuphana University of Lüneburg, Universitätsallee 1, 21335 Lüneburg, Germany ' Institute of Finance and Accounting, Leuphana University of Lüneburg, Universitätsallee 1, 21335 Lüneburg, Germany

Abstract: Goodwill accounting standards, according to International Financial Reporting Standard 3 (IFRS 3) and International Accounting Standard 36 (IAS 36), oblige firms to describe the circumstances that form the basis of the annual impairment testing. We observe that managers' interpretation and application of the IFRS is associated with the information content disclosed in financial statements. The use of boilerplate instead of firm-specific information decreases the information quality. This study investigates the disclosure quality of goodwill impairment testing according to IFRS of German listed companies between 2010 and 2015. Our results provide evidence that firm performance and goodwill impairment losses are positively linked to the quality of goodwill impairment disclosure. Furthermore, the results show that the magnitude of reported goodwill is negatively associated with the disclosure quality. Our findings are robust to additional tests and make several contributions to further research, regulation, and practice.

Keywords: impairment only approach; IOA; International Accounting Standard 36; IAS 36; disclosure quality; goodwill; Germany.

DOI: 10.1504/IJMFA.2018.095941

International Journal of Managerial and Financial Accounting, 2018 Vol.10 No.4, pp.301 - 330

Received: 09 May 2017
Accepted: 23 Sep 2017
Published online: 05 Nov 2018 *

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