Intangible Assets, Goodwill and Earnings Management: Evidence from France and the Uk

Kimouche Bilal ()
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Kimouche Bilal: Lecturer A, Department of Finance and Accounting, The Université 20 Août 1955-Skikda, Algeria

Folia Oeconomica Stetinensia, 2022, vol. 22, issue 1, 111-129

Abstract: Research background: The literature has argued that accounting for intangible assets and goodwill provides a wide range for managers to manipulate earnings. Purpose: This paper aims to investigate the impact of accounting treatment of intangible assets and goodwill on earnings management. Research methodology: The study included 115 French companies and 100 UK companies, during 2011–2019, employing multiple regression, where earnings management was measured through discretionary accruals; while accounting for intangibles and goodwill was divided into the capitalization and decapitalization of intangible assets, recognition and derecognition of goodwill, and depreciation and impairment of intangible assets and goodwill. Results: According to the results, accounting for intangible assets and goodwill has an impact on earnings management, while it is used differently between French and UK companies. In France, companies employ intangible assets capitalization to manipulate earnings, while UK companies use intangible assets capitalization and goodwill recognition. Novelty: This study provides supplementary evidence for standards setters, managers, and auditors about the contribution of accounting for intangible assets and goodwill in the quality of financial reporting and explores the new tools and practices of earnings management.

Keywords: Earnings management; Discretionary accruals; Intangible assets capitalization; Goodwill recognition; Depreciation and impairment of intangibles and goodwill (search for similar items in EconPapers)
JEL-codes: E22 G32 M41 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:foeste:v:22:y:2022:i:1:p:111-129:n:6

DOI: 10.2478/foli-2022-0006

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