Start Date
4-10-2024 1:00 PM
End Date
4-10-2024 1:50 PM
Location
Beacom Hall Room 309
Submission Type
Competitive Paper
Track
Accounting and Finance
Abstract
ASC 350-20 grants public business entities (PBEs) the discretion to determine timely recognition of goodwill impairment charges, which likely introduces managerial ambiguity in the goodwill impairment process. Consequently, this paper explores whether the ambiguity in goodwill accounting standards allows managers to engage in favorable financial reporting during economic unrest, such as the global financial crisis of 2008 and 2009 or the COVID-19 pandemic beginning in 2020. The study introduces an indicator variable to identify PBEs with highly elastic goodwill changes, providing insight a PBE's internal processes and how its management practices for goodwill impairment differ from standard industry practices. We test our hypotheses through a sample of firms from 2003 – 2023 to evaluate if the indicator variable predicts goodwill impairment charges during macroeconomic events. Our evidence suggests that the procedural indistinctness ASC 350-20 allows did not exist during the global financial crisis of 2008 and 2009; however, it is present during the COVID-19 years.
Included in
Goodwill Elasticity and the Opportunity for Favorable Financial Reporting
Beacom Hall Room 309
ASC 350-20 grants public business entities (PBEs) the discretion to determine timely recognition of goodwill impairment charges, which likely introduces managerial ambiguity in the goodwill impairment process. Consequently, this paper explores whether the ambiguity in goodwill accounting standards allows managers to engage in favorable financial reporting during economic unrest, such as the global financial crisis of 2008 and 2009 or the COVID-19 pandemic beginning in 2020. The study introduces an indicator variable to identify PBEs with highly elastic goodwill changes, providing insight a PBE's internal processes and how its management practices for goodwill impairment differ from standard industry practices. We test our hypotheses through a sample of firms from 2003 – 2023 to evaluate if the indicator variable predicts goodwill impairment charges during macroeconomic events. Our evidence suggests that the procedural indistinctness ASC 350-20 allows did not exist during the global financial crisis of 2008 and 2009; however, it is present during the COVID-19 years.
