Bochumer Beiträge Band 70

Sellhorn, Thorsten: Goodwill Impairment - An Empirical Investigation of Write-Offs under SFAS 142

Bochumer Beiträge des Institut für Unternehmensführung, Ruhr-Universität Bochum, 70 (2004)


In 2001, goodwill amortization in the US was eliminated in favor of an impairment-only approach, which, according to critics, gives managers vast discretion and opportunities for earnings management. Prior research suggests that discretionary asset write-offs are associated with economic factors und manager'financial reporting objectives. Based on a systematic literature review, this study investigates for a comprehensive sample of US firms the determinants of goodwill writes-off behavior. Regression analysis shows that write-off behavior ist significantly explained by firms'economic properties. Only in large, high-profile firms, incentives appear to be significant determinants. These findings suggest that the impairment-only approach does capture goodwill impairment at least to some extent.