Is good will impairment loss meaningful information?

Authors

Orapin Duangploy, University of Houston-Downtown, U.S.A
Khursheed Omer, University of Houston-Downtown, U.S.A
Justo Manrique, University of Houston-Downtown, U.S.A
Margaret Shelton, University of Houston-Downtown, U.S.A

Abstract

This study investigates information content of goodwill impairment loss reported under current GAAP (Generally Accepted Accounting Principles). It explains the market’s negative reaction to goodwill impairment losses. The sequential specification approach is used to analyze the factors affecting the level of normalized stock returns. Cumulative effect and change in debt to total assets were found to be important variables in determining the level of normalized stock returns. The finding suggests that while goodwill write-off may not affect cash flows or tangible assets, it provides information about future change in the earnings potential and increased degree of risk to solvency of the firm.

Keywords

Goodwill, Impairment loss, SFAS 141, SFAS 142, Business combinations, Goodwill write-off

DOI

https://doi.org/10.54784/1990-6587.1129

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Recommended Citation

Duangploy, O., Omer, K., Manrique, J., & Shelton, M. (2008). Is good will impairment loss meaningful information?. Business Review, 3(1), 7-22. Retrieved from https://doi.org/10.54784/1990-6587.1129