The Relevance of Context for Goodwill Impairment Decisions Within Hall’s Framework

Goodwill provides the proverbial canary in the coal mine for financial reporting since any hint of impairment allows financial users to determine conditions of worsening economic conditions, thus enabling a company to thrive within its stakeholder environment. Goodwill impairment decisions require benchmarks, assumptions about growth rates and other subjective elements left to the management’s discretion. All these variables are intertwined with the companies’ cultural framework. This paper tries to investigate the determinants and quality of goodwill impairment decisions within two separate accounting cultures under Hall’s classification of low-context/high-context considering high-context emerging European markets such as Poland and Romania as well as low-context emerging African markets such as South Africa and Zimbabwe in two models, one investigating goodwill impairment decisions with the other focusing on the relevance of goodwill numbers. The findings suggest that cultural context is connected through various proxy variables to goodwill impairment decisions, thus shedding light on a set of novel variables for consideration.