On the allocation of a takeover purchase price under AASB1013

James, Kieran and How, Janice and Verhoeven, Peter (2011) On the allocation of a takeover purchase price under AASB1013. Asian Academy of Management Journal of Accounting and Finance, 7 (2). pp. 1-34. ISSN 1823-4992

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Abstract

The purpose of this paper is to document and explain the allocation of takeover purchase price to identifiable intangible assets (IIAs), purchased goodwill, and/or target net tangible assets in an accounting environment unconstrained with respect to IIA accounting policy choice. Using a sample of Australian acquisitions during the unconstrained accounting environment from 1988 to 2004, we find the percentage allocation of purchase price to IIAs averaged 19.09%. The percentage allocation to IIAs is significantly positively related to return on assets and insignificantly related to leverage, contrary to opportunism. Efficiency suggests an explanation: profitable firms acquire and capitalise a higher percentage of IIAs in acquisitions. The target's investment opportunity set is significantly positively related to the percentage allocation to IIAs, consistent with information-signalling. The paper contributes to the accounting policy choice literature by showing how Australian firms make the one-off accounting policy choice in regards allocation of takeover purchase price (which is often a substantial dollar amount to) in an environment where accounting for IIAs was unconstrained.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Authors retain the following rights:... (iii) make any version of the Contribution available on digital repositories; provided in each case PENERBIT USM (and Publication) is cited as the first/forthcoming publisher of the Contribution and the Author(s) accurately distinguish any modified version of the Contribution from that published or to be published by PENERBIT USM.
Depositing User: Dr Kieran James
Faculty / Department / School: Historic - Faculty of Business and Law - School of Accounting, Economics and Finance
Date Deposited: 19 Jun 2012 08:05
Last Modified: 17 Jul 2014 05:49
Uncontrolled Keywords: purchased goodwill; identifiable intangible assets; accounting policy choice; information signalling; opportunism
Fields of Research (FOR2008): 15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150103 Financial Accounting
15 Commerce, Management, Tourism and Services > 1503 Business and Management > 150304 Entrepreneurship
15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150101 Accounting Theory and Standards
Socio-Economic Objective (SEO2008): B Economic Development > 91 Economic Framework > 9102 Microeconomics > 910206 Market-Based Mechanisms
URI: http://eprints.usq.edu.au/id/eprint/21396

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