scholarly journals Big bath and goodwill impairment

2019 ◽  
Vol 21 (2) ◽  
pp. 312-331
Author(s):  
Cristina Gonçalves ◽  
Leonor Ferreira ◽  
Efigénio Rebelo ◽  
Joaquim Fernandes
Keyword(s):  
Goodwill Impairment ◽  
Big Bath

Big Bath Earnings Management: The Case Of Goodwill Impairment Under SFAS No. 142

2011 ◽  
Vol 20 (2) ◽  
Author(s):  
Charles E. Jordan ◽  
Stanley J. Clark
Keyword(s):  
Earnings Management ◽  
Compelling Evidence ◽  
Font Size ◽  
Goodwill Impairment ◽  
Current Period ◽  
Fortune 100 ◽  
Big Bath

<p class="MsoBodyText2" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-style: normal; mso-bidi-font-style: italic;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">The big bath theory of earnings management suggests that firms experiencing low earnings in a given year may take discretionary write downs to reduce even further the current period&rsquo;s earnings.<span style="mso-spacerun: yes;">&nbsp; </span>The notion is that the company and its management will not be punished proportionately more for the big hit it takes to its already depressed earnings.<span style="mso-spacerun: yes;">&nbsp; </span>This &ldquo;clearing of the decks&rdquo; makes it easier to generate higher profits in later years.<span style="mso-spacerun: yes;">&nbsp; </span>SFAS No. 142, with its new requirement to test goodwill annually for impairment, provided a unique opportunity to test this big bath theory.<span style="mso-spacerun: yes;">&nbsp; </span>Examining Fortune 100 companies, this study presents compelling evidence that the big bath theory is more than just a theory but is instead a practiced method of managing earnings.</span></span></span></p>

scholarly journals Using Goodwill Impairment To Effect Earnings Management During SFAS No. 142s Year Of Adoption And Later

2011 ◽  
Vol 5 (1) ◽  
Author(s):  
Charles E. Jordan ◽  
Stanley J. Clark ◽  
Carol E. Vann
Keyword(s):  
Earnings Management ◽  
Line Treatment ◽  
Goodwill Impairment ◽  
Big Bath ◽  
Number Of Firms

Prior research (Bens and Heltzer, 2004) shows that the market penalizes firms less for reporting goodwill write-downs below-the-line than it does for presenting them above-the-line.  Only in 2002, the year SFAS No. 142 became effective, did goodwill impairments enjoy below-the-line treatment.  The current research provides evidence that firms “cherry picked” this year to recognize large impairment losses, thus removing much of the burden from future years when these losses otherwise would have been reported above-the-line.  The study also indicates that, even though the number of firms taking goodwill write-offs declined subsequent to 2002, those entities that did so seemed to be taking these discretionary hits because earnings were already depressed in the current year.  As such, the big bath earnings management observed in the year of adoption in previous studies (Jordan and Clark, 2004 and 2005) appears to continue even though these impairment losses no longer receive favorable below-the-line treatment.

(IR) Relevance of goodwill impairment: the case of European banking (2005–2015)

2020 ◽  
Author(s):  
Jorge Pallarés Sanchidrián ◽  
Javier Pérez García ◽  
José A. Gonzalo-Angulo
Keyword(s):  
Goodwill Impairment ◽  
European Banking

Evidence on IFRS goodwill impairment testing by Australian and New Zealand firms

2010 ◽  
Vol 36 (9) ◽  
pp. 785-798 ◽  
Author(s):  
Tyrone M. Carlin ◽  
Nigel Finch
Keyword(s):  
New Zealand ◽  
Goodwill Impairment

scholarly journals The Timing of Goodwill Write-off: Cases of Initial Overpayment

2016 ◽  
Vol 9 (11) ◽  
pp. 65
Author(s):  
Jamaliah Abdul Majid ◽  
Robiah Abu Bakar ◽  
Nor Asma Lode
Keyword(s):  
Annual Reports ◽  
Accounting Choice ◽  
Business Combinations ◽  
Listed Firms ◽  
Goodwill Impairment ◽  
Depth Analysis ◽  
The Future ◽  
Choice Literature ◽  
Acquisition Price

<p>This paper explores types of accounting choice related to reporting goodwill impairment losses, if any, exercised by Malaysian listed firms after an implementation of IFRS 3. The study is carried out through an in-depth analysis of annual reports for fifteen firms over a number of years. The fifteen firms selected are those that have goodwill arising from business combinations in December 2006/7, reported goodwill impairment losses in the current year or the future year(s), and the goodwill represents 50% or more of the acquisition price. Results show that of the fifteen firms examined, eight firms appeared to exercise the accounting choice in the form of opportunistic timing in reporting the impairment losses. The study contributes to the accounting choice literature by providing evidence on the timing of goodwill impairment losses for goodwill that arose from an apparent overpayment made at the time of an acquisition of a subsidiary.</p>

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