Evolution of intangible asset accounting: Evidence from Australia. (14th March 2018)

• Record Type: Journal Article
• Authors: Dinh, Tami; Kang, Helen; Morris, Richard D.; Schultze, Wolfgang
• Is Part Of: Journal of international financial management & accounting. Volume 29:Number 3(2018)
• Page Start: 247
• Page End: 279
• Publication Date: 2018-03-14
• Subjects: goodwill -- identifiable intangible assets -- IFRS adoption; International business enterprises -- Finance -- Periodicals; International finance -- Periodicals; Managerial accounting -- Periodicals; Electronic journals; 658.15
• DOI: 10.1111/jifm.12081
• Languages: English
• ISSNs: 0954-1314

Abstract

Abstract: This study investigates how the adoption of IFRS in Australia has changed the accounting for goodwill and identifiable intangible assets (IIA). Based on unique hand‐collected data for 802 Australian firm‐years during 2000–2010, we find that expenses related to IIA are higher under IFRS, which is consistent with the view that IFRS accounting policies for IIA are stricter than those under Australian domestic accounting standards pre‐2005 (AGAAP). Our results show two effects that accompany higher IIA expenses under IFRS, which reduce a negative impact on earnings: (i) lower goodwill expenses, and (ii) a shift in recognition of IIA from those with finite useful life to IIA with indefinite useful life. Finally, our market value analyses suggest that the market does not treat mechanical goodwill amortization as a genuine expense, but does treat as genuine expenses discretionary impairment charges, and more lenient IIA amortization under AGAAP. Our results are in line with prior Australian studies claiming that imposing stricter accounting rules for intangible assets under IFRS tends to diminish the quality of investors' information set.