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Intangible Assets, Goodwill and Earnings Management: Evidence from France and the Uk

Author

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  • Kimouche Bilal

    (Lecturer A, Department of Finance and Accounting, The Université 20 Août 1955-Skikda, Algeria)

Abstract

Research background: The literature has argued that accounting for intangible assets and goodwill provides a wide range for managers to manipulate earnings. Purpose: This paper aims to investigate the impact of accounting treatment of intangible assets and goodwill on earnings management. Research methodology: The study included 115 French companies and 100 UK companies, during 2011–2019, employing multiple regression, where earnings management was measured through discretionary accruals; while accounting for intangibles and goodwill was divided into the capitalization and decapitalization of intangible assets, recognition and derecognition of goodwill, and depreciation and impairment of intangible assets and goodwill. Results: According to the results, accounting for intangible assets and goodwill has an impact on earnings management, while it is used differently between French and UK companies. In France, companies employ intangible assets capitalization to manipulate earnings, while UK companies use intangible assets capitalization and goodwill recognition. Novelty: This study provides supplementary evidence for standards setters, managers, and auditors about the contribution of accounting for intangible assets and goodwill in the quality of financial reporting and explores the new tools and practices of earnings management.

Suggested Citation

  • Kimouche Bilal, 2022. "Intangible Assets, Goodwill and Earnings Management: Evidence from France and the Uk," Folia Oeconomica Stetinensia, Sciendo, vol. 22(1), pages 111-129, June.
    • Handle: RePEc:vrs:foeste:v:22:y:2022:i:1:p:111-129:n:6
    DOI: 10.2478/foli-2022-0006
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    References listed on IDEAS

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    2. Quick, Reiner & Albersmann, B. T. & Friedrich, Christian & Hohenfels, D., 2020. "Goodwill Impairment Tests as a Device for Earnings Management: Evidence from Germany," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 124763, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    3. Jani Saastamoinen & Arsen Djatej & Kati Pajunen & M. David Gorton, 2020. "Practitioner views of goodwill accounting under US GAAP," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 21(4), pages 783-798, July.
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    More about this item

    Keywords

    Earnings management; Discretionary accruals; Intangible assets capitalization; Goodwill recognition; Depreciation and impairment of intangibles and goodwill;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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