Title

An Investigation of Goodwill Accounting Policy Choice within a Specific Knowledge Framework

Publication Type

Journal Article

Publication Date

6-2001

Abstract

This study, using Singapore data, investigates the relationship between Chief Executive Officers' (CEO) specific knowledge and the accounting method choice on capitalisation of goodwill. International Accounting Standard 22 (1987), applicable in Singapore in 1996, the year of the study, permits a choice between capitalisation with subsequent amortisation and immediate write-off of goodwill to reserves. This study proposes a positive relationship between human capital specificity of CEOs and the recognition of purchased goodwill on the balance sheet. Specific knowledge is unique to firms and is acquired through experience. Given that specialised assets arise from firm-specific circumstances, firm-specific knowledge potentially explains the recognition policies pertaining to specialised assets. Overall, the evidence in this study supports a positive relationship between CEOs firm-specific knowledge and the capitalisation of goodwill.

Keywords

Determinants of Goodwill accounting, direct write offs and amortization, Directors' specific knowledge of businesses

Discipline

Accounting | Corporate Finance

Research Areas

Financial Performance Analysis

Publication

Asia-Pacific Journal of Accounting and Economics

Volume

8

Issue

1

First Page

21

Last Page

41

ISSN

1608-1625

Identifier

10.1080/16081625.2001.10510585

Publisher

Taylor and Francis