Fourth, auditors are more sensitive to the amount of goodwill impairments than to their mere existence. Third, this positive association is more salient when auditors are industry experts and there is no auditor–client mismatch. Second, the positive association between goodwill impairments and modified audit opinions is driven primarily by earnings management risks. First, the probability of receiving a modified opinion increases with the amount of goodwill impairments. Using a sample of firms listed on China’s A-share market from 2007 to 2017, we test the association between goodwill impairments and the type of audit opinion received in the same financial period. We examine whether auditors, as a crucial external monitor, identify the information risks of goodwill impairments and express their concerns about financial reporting quality in their audit opinions. The influence of goodwill impairments on a firm’s financial position and profitability give reason to doubt its current and future performance.
There has been a steady growth of goodwill impairments in the Chinese stock market since the adoption of the impairment approach in accounting.
This is because the fair value measurement for fixed assets involves estimation and subjectivity of the asset appraiser enhancing the possibility of earnings management. GAAP is more optimal than that of IFRS for preventing earnings management so as to improve the quality of faithful representation of the fixed asset value. In addition, the fixed asset accounting standard of U.S. This is because IFRS allows for recovery of impairment losses. Based on an analysis of the theory and literature review, this study conclude that the fixed assets accounting standard of IFRS is more optimal to represent the COVID-19 pandemic faithfully than that of U.S. GAAP or IFRS which is more optimal to improve the faithful representation in the case of the COVID-19 pandemic and earnings management. Therefore, this study aims to analyze the fixed asset accounting standards of U.S. These differences have distinct implication to depict the COVID-19 pandemic phenomenon and prevent earnings management that will affect the qualitative characteristics of the faithful representation. The FASB does not allow firms to restore the asset value that has been written down, while the IASB allow companies to recover the asset values that has been written down. The present paper augments the scarce current literature on determinants of misrepresentation in financial reports during business combinations by illuminating the role of financial market competition among Italianlisted companies involved in strategic M&A operations between 20 in earnings management practices based on discretionary accruals manipulation.įASB and IASB have differences in setting the accounting standard for fixed asset. Stenheim and Madsen (2016) have found that goodwill manipulation occurs much more frequently in companies that operate in those sectors with a downward trend of ROAs, in companies that record low returns and in companies that have high book to market ratios in the period prior managing of goodwill. The most recent research questions made efforts of abstraction and looked for empirical confirmation regarding the possibility that the determinants of managerial goodwill-based strategic accounting choices could be brought back not only to the individual company characteristics, but also to the dynamics of the whole sector. In addition, the regulatory authorities should ensure that independent directors covers more than quarter of the board as they play crucial role in the curtailing of management opportunistic behavior in relation to goodwill impairment loss recognition.
As such, the study recommends that the institutional investors in Nigeria should become more active in their engagement and activism. The study employed panel logistic regression in the analysis of data and from this analysis, the study found that board independence has a positive and significant relationship with goodwill impairment loss recognition, while institutional shareholdings has a negative and significant relationship with goodwill impairment loss recognition. Ex-post factor research design was adopted and secondary data was obtained from the audited annual financial reports of the sampled firms. The study covered a period of 6 years from 2011 to 2016 with a firm year observation of 70 firms and a sample size of thirteen 13 firms. This study examines the effect of monitoring mechanism on goodwill impairment loss recognition of listed deposit money banks and insurance firms in Nigeria.
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