Is older goodwill value relevant?

Martin Bugeja and Natalie Gallery

Accounting and Finance, 2006, vol. 46, issue 4, pages 519-535

Abstract: Although previous research has generally found that goodwill reported in firms' financial reports is relevant to equity valuation, no known studies have directly examined whether the value-relevance of purchased goodwill holds as it ages. We examine this issue in the Australian context to determine whether the market attaches different values to the components of Australian firms' goodwill when it is disaggregated into different 'ages'. Our results suggest that recently acquired goodwill has information content whereas 'older' goodwill does not. Our findings have implications for goodwill accounting practice and recent changes to goodwill accounting standards. Copyright (c) The Authors Journal compilation (c) 2006 AFAANZ.

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