ASBJ Publishes Research Paper No. 3, Analyst Views on Financial Information Regarding Goodwill

12 June 2017

 

The ASBJ published Research Paper No. 3, Analyst Views on Financial Information Regarding Goodwill with a view to contribute to the global discussion regarding the accounting for goodwill.

The ASBJ conducted in-depth interviews with 11 analysts in Japan with the aim of understanding their current views on goodwill and impairment more thoroughly.  This Research Paper summarises the results of those in-depth interviews. 

This Research Paper, among others, noted the following findings:

  1. The method of analyses varied among analysts.  Some analysts placed more significant importance on the analyses based on cash flow information, whereas other analysts placed significant importance on analyses based on accounting profit and net asset information as much as on analyses based on cash flow information.
  2. The views on the subsequent accounting for goodwill (the amortisation of goodwill) varied among analysts.  Some analysts stated views in favour of the amortisation and impairment approach, whereas others stated views in favour of the non-amortisation approach.  In addition, some analysts were indifferent between amortisation and non-amortisation of goodwill from the perspective of conducting analyses based on cash flow information.
  3. Some analysts thought that information regarding the management’s estimate of the period for which expected future cash flows would increase due to the business combination was useful.
  4. Many analysts thought that impairment losses on goodwill were recognised later than when they thought the deterioration in the value of goodwill had occurred.  These analysts incorporated the deterioration in the value of goodwill in their analyses before the impairment losses on goodwill were recognised.

As for the implications of the results of those in-depth interviews in the context of setting standards, the ASBJ observes that, for the subsequent accounting for goodwill, to reflect the analyst views in the process of developing accounting standards, the relevance of financial information for more analysts would be improved by placing more significance on the views of analysts who support the amortisation and impairment approach.  The ASBJ includes the observation in this Research Paper.

The ASBJ hopes that the Research Paper facilitates the discussions related to the accounting for goodwill internationally.

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