Stakeholder’s Perception of Subsequent Goodwill Measurement: An Analysis of IASB Comment Letters

Abstract

Goodwill is the most intangible of intangibles and continues to generate great debate in academic, business, and regulatory circles, with no consensus on its subsequent measurement. In early 2020, the International Accounting Standards Board (IASB) published a discussion paper entitled DP/2020/1 Business Combinations – Disclosures, Goodwill and Impairment, to gather input on more useful disclosures on business combinations, bringing back to the discussion the subject of the subsequent measurement of goodwill. The IASB received comments on its proposed disclosures, as well as new evidence and arguments on how to account for goodwill, having received 193 comment letters from a wide range of stakeholders. This study aims to analyse the perception of those interested parties about the subsequent measurement of goodwill proposed by the IASB, as well as the arguments used for its reasoning. For this purpose, the content of stakeholder’s comment letters was analysed and classified as academics, auditors, investors, standard setters, preparers, regulators/securities, and others, and by region. In addition, the preparers’ comment letters were subclassified by sectors of activity to identify differences in the perception of preparers by industry. These differences point to the need to reflect on the existence of more than one goodwill measurement model, which best fits the sector of activity, a pioneering aspect in research on goodwill. The results reveal a preference trend for the systematic amortisation of goodwill. In all categories of stakeholders, apart from the "Others", the preference is for the reintroduction of goodwill amortisation. Similarly, most stakeholders in the Americas, Asia, Europe, and Oceania are in favour of reintroducing the systematic amortisation of goodwill. In some industries (Automotive, Banking, Luxury Goods, Electrical Appliances, Energy and Technology) no preparer prefers the impairment-only model, which suggests that perhaps in those sectors of activity, this model is not suitable. This study contributes to the literature on the subsequent measurement of goodwill, as well as to the different stakeholders, by presenting, under different perspectives of analysis, the respondents' preferences on the subsequent measurement of goodwill, as well as the arguments in favour of each model.