On the allocation of a takeover purchase price under AASB1013

Kieran, James, How, Janice, & Verhoeven, Peter (2011) On the allocation of a takeover purchase price under AASB1013. Asian Academy of Management Journal of Accounting and Finance, 7(2), pp. 1-34.

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The purpose of this paper is to document and explain the allocation of takeover purchase price to identifiable intangible assets (IIAs), purchased goodwill, and/or target net tangible assets in an accounting environment unconstrained with respect to IIA accounting policy choice. Using a sample of Australian acquisitions during the unconstrained accounting environment from 1988 to 2004, we find the percentage allocation of purchase price to IIAs averaged 19.09%. The percentage allocation to IIAs is significantly positively related to return on assets and insignificantly related to leverage, contrary to opportunism. Efficiency suggests an explanation: profitable firms acquire and capitalise a higher percentage of IIAs in acquisitions. The target's investment opportunity set is significantly positively related to the percentage allocation to IIAs, consistent with information-signalling. The paper contributes to the accounting policy choice literature by showing how Australian firms make the one-off accounting policy choice in regards allocation of takeover purchase price (which is often a substantial dollar amount to) in an environment where accounting for IIAs was unconstrained.

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ID Code: 65746
Item Type: Journal Article
Refereed: Yes
Additional URLs:
Keywords: purchased goodwill, identifiable intangible assets, accounting policy choice, information signalling, opportunism
ISSN: 1823-4992
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2011 Asian Academy of Management and Penerbit Universiti Sains Malaysia
Deposited On: 08 Jan 2014 01:46
Last Modified: 14 May 2014 06:06

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