Discount rates in disarray : evidence on flawed goodwill impairment testing
Gallery, Gerry T. (2009) Discount rates in disarray : evidence on flawed goodwill impairment testing. Australian Accounting Review, 19(4), pp. 337-339.
Carlin and Finch, this issue, compare goodwill impairment discount rates used by a sample of large Australian firms with ‘independently’ generated discount rates. Their objective is to empirically determine whether managers opportunistically select goodwill discount rates subsequent to the 2005 introduction of International Financial Reporting Standards (IFRS) in Australia. This is a worthwhile objective given that IFRS introduced an impairment regime, and within this regime, discount rate selection plays a key role in goodwill valuation decisions. It is also timely to consider the goodwill valuation issue. Following the recent downturn in the economy, there is a high probability that many firms will be forced to write down impaired goodwill arising from boom period acquisitions. Hence, evidence of bias in rate selection is likely to be of major concern to investors, policymakers and corporate regulators. Carlin and Finch claim their findings provide evidence of such bias. In this commentary I review the validity of their claims.
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|Item Type:||Journal Article|
|Keywords:||Goodwill, IFRS, International Financial Reporting Standards, Impairment testing|
|Subjects:||Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > ACCOUNTING AUDITING AND ACCOUNTABILITY (150100) > Accounting Theory and Standards (150101)|
|Divisions:||Current > QUT Faculties and Divisions > QUT Business School|
Current > Schools > School of Accountancy
|Copyright Owner:||Copyright 2009 CPA Australia|
|Deposited On:||27 Apr 2010 11:25|
|Last Modified:||05 Jan 2011 23:58|
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