Goodwill Accounting -A study of public groups in Sweden, Germany and the United Kingdom before and after IFRS

Abstract: Background and problem: The European Union has worked to achieve accounting harmonization during the last decades. In 2005, IFRS became mandatory for public groups within the European Union when compiling their consolidated financial statements. Whether or not this has lead to harmonization in practise is a debated subject. One large change that the implementation of IFRS brought for many countries was the abolishment of goodwill amortizations in favour of annual impairment tests. This is an area where the accounting quality under IFRS has been frequently discussed. Purpose: The purpose of this study is twofold. The first one is to investigate whether there have been national differences concerning goodwill charges in public groups, and the second one is to investigate if certain financial factors have influenced goodwill charges in the three countries before and after the mandatory adoption of IFRS. Method: Financial data for the years 2001-2012 was retrieved from an online database and then divided into the three time periods 2001-2004, 2005-2008 and 2009-2012. A total of 15 multiple regression tests were performed, which concerned different time periods and different countries. Six of them were done to investigate differences between Sweden and the UK and Germany respectively, and the remaining nine were used to investigate what factors that have influenced goodwill charges. The results were interpreted and analyzed using the theories and standards that are described in the study. Results and conclusions: The regression tests show that there were differences between both Sweden and Germany and Sweden and the UK during the first period investigated (2001- 2004). However, the regression model could not find any differences during the two other periods. As for the tests regarding the influencing factors on goodwill charges, it was hard to find any general pattern as to what factors were influential to goodwill charges over time and between different countries. The conclusion is drawn that the factors affecting goodwill charges are many, varied and seemingly arbitrary. Suggestions for further research: A similar study could be conducted using a qualitative method, enabling factors that are not as easy to quantify, such as disclosure compliance, to be studied.