Accounting for goodwill in Australian business combinations: is there a value to choose?

James, Kieran (2010) Accounting for goodwill in Australian business combinations: is there a value to choose? VDM Verlag Dr Muller, Saarbrucken, Germany. ISBN 978-3-639-29323-4

Abstract

This research explores the empirical association between takeover bid premium and acquired goodwill, and tests whether the empirical association changes after the passage of approved accounting standard AASB1013: Accounting for Goodwill. AASB1013 mandates capitalization and amortization of acquired goodwill to the profit and loss account, over a maximum time period of 20 years. Using real options and contracting cost frameworks, this study argues that reducing the variety of accounting policy options available to bidder management after an acquisition results in a systematic loss in firm value. An empirical model developed by Robinson and Shane (1990) and Choi and Lee (1991) is used to measure the average effect on bid premiums of the mandatory change in accounting rule, after controlling for a range of confounding variables including mode of payment, managerial share ownership, and bidder prior share ownership. Based on a final sample consisting of 127 pre-AASB1013 bids and 134 post-AASB1013 bids, the results show that the goodwill accounting rule contained in AASB1013 significantly reduces both the mean and median level of bid premium and the strength of the association between acquired goodwill and bid premium.


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Item Type: Book (Commonwealth Reporting Category A)
Refereed: No
Item Status: Live Archive
Additional Information: Permanent restricted access to electronic version due to publisher copyright restrictions. Originally presented as a PhD thesis to Curtin University of technology, in 2005. Print copy held in the USQ Library at call no. 657.96 Jam.
Depositing User: Dr Kieran James
Faculty / Department / School: Historic - Faculty of Business - School of Accounting, Economics and Finance
Date Deposited: 09 Nov 2010 05:16
Last Modified: 03 Jul 2013 00:05
Uncontrolled Keywords: accounting policy choice; bid premium; costly contracting; goodwill; intangible assets; positive accounting theory; real options
Fields of Research (FOR2008): 15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150103 Financial Accounting
15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150201 Finance
15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150101 Accounting Theory and Standards
15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150104 International Accounting
Socio-Economic Objective (SEO2008): B Economic Development > 90 Commercial Services and Tourism > 9001 Financial Services > 900101 Finance Services
E Expanding Knowledge > 97 Expanding Knowledge > 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
URI: http://eprints.usq.edu.au/id/eprint/8931

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