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The impact of IFRS goodwill reporting on financial analysts' equity valuation judgements: some experimental evidence
Author(s) -
Hellman Niclas,
Andersson Patric,
Fröberg Emelie
Publication year - 2016
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12189
Subject(s) - goodwill , valuation (finance) , business , earnings , cash flow , equity (law) , accounting , free cash flow , value (mathematics) , corporate finance , book value , actuarial science , economics , finance , machine learning , political science , computer science , law
This article uses an experiment to investigate how professional financial analysts evaluate a corporate acquisition announced by an IFRS preparer. The findings suggest that professional analysts are affected by preparers' acquisition premium allocations in a potentially misleading way as the participants considered the acquisition to be value‐enhancing when the premium was allocated to goodwill, but value‐reducing when allocated to identifiable intangible assets. These effects were mitigated at the aggregate level when additional discounted cash flow analysis information was provided; however, there were significant differences in information search behaviour as quite many participants focused primarily on the exploitation of earnings information.