The Intention to Buy: An Empirical Study of the Choice of Goodwill Method under IFRS

Abstract: As of 1 July 2009, IFRS 3 allows for a policy choice, available on a transaction by transaction basis, to measure NCI at fair value or the proportionate share of net assets (IFRS 3.19), also known as the full and partial goodwill methods. The purpose of this thesis is to analyse the influence of country, industry and topic factors on the choice of goodwill method in European firms. Data consists of 188 hand-collected choices made to account for control acquisitions with remaining NCI effective between 2010 and 2016. Based on univariate and multivariate analyses, we find that country and industry factors do not seem to influence the choice. Instead, our results suggest the influence of transaction-specific topic factors. More specifically, based on a statistically significant relationship between an outstanding option contract and the chosen method, we conclude that acquirers with an intention to buy additional shares from the non-controlling shareholders tend to choose the full goodwill method.