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Implications of the IFRS goodwill accounting treatment

Wines, Graeme, Dagwell, Ron and Windsor, Carolyn 2007, Implications of the IFRS goodwill accounting treatment, Managerial auditing journal, vol. 22, no. 9, pp. 862-880, doi: 10.1108/02686900710829381.

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Title Implications of the IFRS goodwill accounting treatment
Author(s) Wines, Graeme
Dagwell, Ron
Windsor, Carolyn
Journal name Managerial auditing journal
Volume number 22
Issue number 9
Start page 862
End page 880
Publisher Emerald Group Publishing Ltd
Place of publication Bingley, England
Publication date 2007
ISSN 0268-6902
Keyword(s) goodwill accounting
financial reporting
accounting standards
Summary Purpose – This paper aims to critically examine the change in accounting treatment for goodwill pursuant to international financial reporting standards (IFRSs) by reference to the Australian reporting regime.

Design/methodology/approach – The paper discusses and compares the former Australian and the new IFRS treatments for goodwill. This comparison focuses on the advantages and potential complexities of the new method, with the aim of identifying the issues and challenges that preparers, independent auditors and those involved in corporate governance face in complying with the new requirements.

Findings – The paper highlights that the identification and valuation of cash-generating units and goodwill require numerous assumptions to be made in estimating fair value, value in use and recoverable amount. Considerable ambiguity and subjectivity are inherent in the IFRS requirements.

Research limitations/implications – Findings suggest that future research should examine how financial report preparers and corporate governance mechanisms are dealing with the complex change required by the new goodwill accounting treatment and how the many critical issues involved in auditing the resulting figures are being addressed.

Practical implications – The research has practical implications for financial report preparers in identifying the issues that must be addressed in complying with the international goodwill accounting treatment. In turn, the paper highlights conceptual issues of relevance to auditors in their role of providing assurance on the resulting accounting numbers. It also has implications for others involved in corporate governance, such as audit committee members, in emphasising the areas in which they should be providing oversight of the accounting judgments. These issues are of relevance in any reporting regime based on IFRSs.

Originality/value – While much has been written about the mechanics of the new goodwill accounting requirements, there has been a lack of critical research highlighting the many problems and ambiguities that will arise in the application of those rules.
Notes Reproduced with the kind permission of the copyright owner.
Language eng
DOI 10.1108/02686900710829381
Field of Research 150103 Financial Accounting
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2007, Emerald Group Publishing Limited
Free to Read? Yes
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