The value relevance of goodwill: evidence from South Africa

Elmarie Louw, John H. Hall and Leon M. Brümmer

Afro-Asian Journal of Finance and Accounting, 2025, vol. 15, issue 3, 345-363

Abstract: The value relevance of goodwill is a topic of ongoing debate in the financial literature, because of numerous changes in the accounting treatment of this asset class over the years. The aim of this paper is to determine the value relevance of goodwill after the introduction of IFRS 3 in a specific setting, namely South Africa, using firms listed on the Johannesburg Stock Exchange as a sample for the period from 2006 to 2017. The modified Ohlson (1995) model, a well-known accounting-based valuation model, was applied to 1272 firm years to determine the value relevance of goodwill. The study contributes to the existing literature by presenting evidence that goodwill is indeed value relevant in the South African setting after the introduction of IFRS 3, and it confirms that the goodwill impairment model is associated with firm value.

Keywords: goodwill; goodwill impairment; IFRS 3; South African firms; value relevance; South Africa. (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ids:afasfa:v:15:y:2025:i:3:p:345-363

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