The impact of IFRS goodwill reporting on financial analysts' equity valuation judgements: some experimental evidence

Steven Cahan, Niclas Hellman, Patric Andersson, Emelie Fröberg and Steven Cahan

Accounting and Finance, 2016, vol. 56, issue 1, 113-157

Abstract: type="main" xml:id="acfi12189-abs-0001">

This article uses an experiment to investigate how professional financial analysts evaluate a corporate acquisition announced by an IFRS preparer. The findings suggest that professional analysts are affected by preparers' acquisition premium allocations in a potentially misleading way as the participants considered the acquisition to be value-enhancing when the premium was allocated to goodwill, but value-reducing when allocated to identifiable intangible assets. These effects were mitigated at the aggregate level when additional discounted cash flow analysis information was provided; however, there were significant differences in information search behaviour as quite many participants focused primarily on the exploitation of earnings information.

Date: 2016
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