A comparative analysis of goodwill impairment in two ASEAN countries with different economic development

• Main Author: Abdul Majid, Jamaliah
• Format: Conference or Workshop Item
• Language: English
• Published: 2016
• Subjects: HC Economic History and Conditions
• Online Access: http://repo.uum.edu.my/25305/1/ICSED%202016%201%2016.pdf; http://repo.uum.edu.my/25305/
• Institution: Universiti Utara Malaysia

This study compares motives and constraints to the recognition choice related to reporting zero goodwill impairment of Malaysian listed firms with those of Singaporean listed firms from 2010 to 2012. Using a binary logistic regression, results reveal important differences with regards to potential drivers and constraints to the recognition choice by listed companies between the two ASEAN countries. The Singaporean results appear to suggest that the recognition choice related to reporting zero goodwill impairment is driven by the desire to avoid debt covenant violation, whereas a high ratio of independent directors on the audit committee appears to restraint such recognition choice. Conversely, the Malaysian results seem to suggest that firms chose to exercise the recognition choice when the relative size of goodwill is small. However, the length of the CEO tenure appear to lessen such recognition choice. The findings of this study contributes to the literature on IFRS and accounting harmonization by supporting the view that having similar accounting standards may not necessarily imply that the financial statements of listed firms in the two countries are entirely comparable. Other factors, in particular, firms’ reporting incentives and the effectiveness of corporate governance mechanisms play important roles in influencing the financial statement comparability. The study also provides important implications for policy makers and relevant authorities, in that, to improve the comparability of the financial statements in the two ASEAN countries, the relevant authorities need to closely monitor firms’ reporting incentives and further strengthen the corporate governance mechanisms.