The Value Relevance of Reported Goodwill

Authors

Abstract

Purpose – The purpose of this paper is to investigate the value relevance of the goodwill reported in the consolidated financial statements of all non-finance companies listed on the Tehran Stock Exchange from 2006 to 2011.
Design/methodology/approach – The paper uses regression analysis based on valuation model developed originally by Ohlson (1995) in which stock price is using as the dependent variable and book value of equity per share, book value of equity minus the amount of recognized goodwill per share, earnings per share and goodwill per share as independent variables.
Findings – The paper shows that net earnings and reported goodwill are highly significantly associated with stock price.
Research limitations/originality/value/implications – We did not find any research on value relevance of reported goodwill in Iran, this research it is important to provide evidence about effects of different cultural and institutional characteristics of economic contexts of Iran on value relevance of reported goodwill. The results of this paper provide insights about accounting of intangible assets for financial accountants, standard setters, auditors and investors.

Keywords

References

پورحیدری، امید؛ غلامرضا سلیمانی امیری؛ محسن صفاجو. (1384) .«بررسی میزان ارتباط سود و ارزش دفتری با ارزش بازار سهام شرکت‌های پذیرفته شده در بورس اوراق بهادار تهران». بررسی‌های حسابداری و حسابرسی، 84 (42)، 3- 19، دانشکده مدیریت دانشگاه تهران.
کمیته تدوین استانداردها، (1387) .استانداردهای حسابداری ایران، چاپ سیزدهم.
Akbar, S., & Stark, A. (2003) . Discussion of scale and the scale effect in market-based accounting research. Journal of Business Finance and Accounting, 30 (1–2) , 57–72.
Al-Jifri, K., & Citron, D. (2009) . The value relevance of financial statement recognition versus note disclosure: evidence from goodwill accounting. European Accounting Review, 18 (1) , 123–140.
Barth, M., Beaver, W., & Landsman, W. (2001) . The relevance of the value relevance literature for financial accounting standard setting: another view. Journal of Accounting and Economics, 31, 77–104.
Beattie, V. (2005) . Moving the financial accounting research front forward: the UK contribution. British Accounting Review, 37, 85–114.
Brown, S., Lo, K., & Lys, T. (1999) . Use of R2in accounting research: measuring changes in value relevance over the last four decades. Journal of Accounting and Economics, 28, 83–115.
Bugeja, M., & Gallery, N. (2006) . Is older goodwill value relevant? Accounting and Finance, 46, 519–535.
Chen, P., & Zhang, G. (2007) . How do accounting variables explain stock price movements? Theory and evidence. Journal of Accounting and Economics, 43,219–244.
Collins, D., Maydew, E., &Weiss, I. (1997) . Changes in the value and relevance of earnings and book values over the past forty years. Journal of Accounting and Economics, 24, 39–67.
Dahmash, F., Durand, R., & Watson, J. (2009) . The value relevance and reliability of reported goodwill and identifiable intangible assets. The British Accounting Review, 41, 120–137.
Francis, J., & Schipper, K. (1999) . Have financial statements lost their relevance? Journal of Accounting Research, 37 (2) , 319–352.
Frii, E, P. (2011) . On the Value Relevance of Banks’ Valuation of Goodwill in Times of Financial Turmoil. Master of Science in Accounting. University of Gothenburg, School of Business, Economics and Law.
Harris, T., Lang, M., & Möller, H. (1994) . The value relevance of German accounting measures: an empirical analysis. Journal of Accounting Research, 32 (2) , 187–209.
Lev, B. (2001) . Intangibles: Management, measurement and reporting. Washington DC: Brooking Institution Press.
Lev, B., & Zarowin, P. (1999) . The boundaries of financial reporting and how to extend them. Journal of Accounting Research, 37 (2) , 353–385.
Ohlson, J. (1995) . Earnings, book value and dividends in security valuation. Contemporary Accounting Research, 11, 611–687.
Oliveira, L., Rodrigues, L. L., Craig, R. (2010) . Intangible assets and value relevance: Evidence from the Portuguese stock exchange. The British Accounting Review, 42, 241-252.
Skinner, J, D. (2007) . Accounting for Intangibles – A Critical Review of Policy Recommendations. SSRN..
Empirical Research in Accounting
Volume 3, Issue 3 - Serial Number 9
September 2013
Pages 111-124

Files

History

  • Receive Date: 25 August 2013
  • Revise Date: 30 June 2018
  • Accept Date: 01 November 2013

Share

How to cite

Statistics