Accounting for Goodwill: An Examination of Factors Influencing Management Preferences

Taib, F and Taylor, Paul and Gore, Pelham (2000) Accounting for Goodwill: An Examination of Factors Influencing Management Preferences. Accounting and Business Research, 30 (3). pp. 213-226. ISSN 2159-4260

[thumbnail of gore_taib_taylor_2000.pdf]
PDF (gore_taib_taylor_2000.pdf)

Download (1MB)


Abstract—This paper investigates factors that influenced the position of managements of UK-listed companies in the heated debate that surrrounded proposals for a new standard on goodwill accounting, i.e. the factors influencing whether managements preferred immediate write-off or capitalisation-based approaches. The factors investigated are derived from contracting cost theory, and include those associated with debt covenant restrictions and profitbased management schemes. They also include non-agency contracting costs. A key feature of the design is that, compared to prior research, we specify more rigorously circumstances where such contracting cost effects are, or are not, likely to be binding. In addition, the paper investigates the effects on management preferences of their beliefs about revisions in market perceptions of their companies resulting from changes in goodwill accounting. Our results support certain contracting cost-based hypotheses, but they also indicate that management beliefs about changes in market perceptions of their companies constitute a strong influence on their preferences.

Item Type:
Journal Article
Journal or Publication Title:
Accounting and Business Research
Uncontrolled Keywords:
ID Code:
Deposited By:
Deposited On:
07 Jan 2010 16:45
Last Modified:
21 Sep 2023 00:49