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The value relevance of purchased goodwill in Malaysian firms: the pre- and post-IFRS evidence

Following the adoption of International Financial Reporting Standards (IFRS) in Malaysia, the accounting for goodwill has changed from systematic amortisation to a method based solely on periodic impairment testing.The objective of the impairment test is to ensure that reported goodwill does not hav...

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Main Authors: Al-Hiyari, Ahmad, Abdul Latif, Rohaida, Amran, Noor Afza
Format: Article
Published: International Academy of Business and Economics (IABE) 2016
Subjects:
HF5601 Accounting
Online Access:http://repo.uum.edu.my/20866/
http://dx.doi.org/10.18374/IJBR-16-3.5
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spelling my.uum.repo.208662017-02-07T01:23:45Z http://repo.uum.edu.my/20866/ The value relevance of purchased goodwill in Malaysian firms: the pre- and post-IFRS evidence Al-Hiyari, Ahmad Abdul Latif, Rohaida Amran, Noor Afza HF5601 Accounting Following the adoption of International Financial Reporting Standards (IFRS) in Malaysia, the accounting for goodwill has changed from systematic amortisation to a method based solely on periodic impairment testing.The objective of the impairment test is to ensure that reported goodwill does not have carrying amount in excess of its recoverable amount.Nevertheless, many critics suggest that the new method may allow managements to engage in opportunistic earnings manipulation activities.In this study, we examine the question of whether goodwill is more value relevant after adoption of an IFRS in Malaysia. Using panel data of non-financial firms listed on the Bursa Malaysia over the period from 2002 to 2010, we find evidence that goodwill is not value relevant in either the pre-and post IFRS periods. These findings are in line with the opponents of the new standards, who claim that, the use Fair Value Accounting (FVA) in the reporting of goodwill increases the opportunities for managerial opportunisms.Therefore, the consequences FVA devoid of relevant information for shareholders.We conclude that the existence of an unfavorable environments in Malaysia impedes efficient implementation of the new impairment regime. International Academy of Business and Economics (IABE) 2016-06 Article PeerReviewed Al-Hiyari, Ahmad and Abdul Latif, Rohaida and Amran, Noor Afza (2016) The value relevance of purchased goodwill in Malaysian firms: the pre- and post-IFRS evidence. International Journal of Business Research, 16 (3). pp. 69-80. ISSN 1555-1296 http://dx.doi.org/10.18374/IJBR-16-3.5
institution Universiti Utara Malaysia
building UUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Utara Malaysia
content_source UUM Institutionali Repository
url_provider http://repo.uum.edu.my/
topic HF5601 Accounting
spellingShingle HF5601 Accounting
Al-Hiyari, Ahmad
Abdul Latif, Rohaida
Amran, Noor Afza
The value relevance of purchased goodwill in Malaysian firms: the pre- and post-IFRS evidence
description Following the adoption of International Financial Reporting Standards (IFRS) in Malaysia, the accounting for goodwill has changed from systematic amortisation to a method based solely on periodic impairment testing.The objective of the impairment test is to ensure that reported goodwill does not have carrying amount in excess of its recoverable amount.Nevertheless, many critics suggest that the new method may allow managements to engage in opportunistic earnings manipulation activities.In this study, we examine the question of whether goodwill is more value relevant after adoption of an IFRS in Malaysia. Using panel data of non-financial firms listed on the Bursa Malaysia over the period from 2002 to 2010, we find evidence that goodwill is not value relevant in either the pre-and post IFRS periods. These findings are in line with the opponents of the new standards, who claim that, the use Fair Value Accounting (FVA) in the reporting of goodwill increases the opportunities for managerial opportunisms.Therefore, the consequences FVA devoid of relevant information for shareholders.We conclude that the existence of an unfavorable environments in Malaysia impedes efficient implementation of the new impairment regime.
format Article
author Al-Hiyari, Ahmad
Abdul Latif, Rohaida
Amran, Noor Afza
author_facet Al-Hiyari, Ahmad
Abdul Latif, Rohaida
Amran, Noor Afza
author_sort Al-Hiyari, Ahmad
title The value relevance of purchased goodwill in Malaysian firms: the pre- and post-IFRS evidence
title_short The value relevance of purchased goodwill in Malaysian firms: the pre- and post-IFRS evidence
title_full The value relevance of purchased goodwill in Malaysian firms: the pre- and post-IFRS evidence
title_fullStr The value relevance of purchased goodwill in Malaysian firms: the pre- and post-IFRS evidence
title_full_unstemmed The value relevance of purchased goodwill in Malaysian firms: the pre- and post-IFRS evidence
title_sort value relevance of purchased goodwill in malaysian firms: the pre- and post-ifrs evidence
publisher International Academy of Business and Economics (IABE)
publishDate 2016
url http://repo.uum.edu.my/20866/
http://dx.doi.org/10.18374/IJBR-16-3.5
_version_ 1644283080047853568
score 13.251813

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