To read this content please select one of the options below:

Goodwill accounting and asymmetric timeliness of earnings

Sohyung Kim (Department of Accounting, Brock University, St Catharines, Canada)
Cheol Lee (Department of Accounting, Wayne State University, Detroit, Michigan, USA)
Sung Wook Yoon (Department of Accounting and Information Systems, California State University, Northridge, Northridge, California, USA)

Review of Accounting and Finance

ISSN: 1475-7702

Article publication date: 9 May 2013




The purpose of this paper is to investigate how fair value reporting and increased managerial discretion under the new goodwill accounting affect the asymmetric timeliness of earnings;, i.e. accounting conservatism.


Various empirical models are applied to a sample of 11,034 firms. To capture a cross‐sectional variation in asymmetric timeliness of earnings, Kahn and Watts' C_Score is adopted.


It is found that financial reporting for firms with purchased goodwill has become more conservative after the enactment of the new standard. However, once an increase in conservatism that is not attributable to new goodwill accounting is controlled for, it is found that accounting earnings for firms with purchased goodwill become less conservative.

Research limitations/implications

The results should be interpreted with caution, because the effect of concurrent events other than the adoption of SFAS 142 on reported earnings is not perfectly controlled.

Practical implications

The results of this paper support Watts' assertion that new goodwill accounting impairs accounting earnings' ability to reflect the economic earnings in a timely manner, but these results should be interpreted with caution, as the main objective of goodwill accounting is not to improve accounting conservatism.


This paper makes a timely contribution to the debate of fair value accounting by focusing on the impact of SFAS 142 on the asymmetric timeliness of earnings. By employing all available firms with purchased goodwill balances rather than relying on firms that report impairment losses, our research design better captures the impact of SFAS 142 on financial reporting.



Kim, S., Lee, C. and Wook Yoon, S. (2013), "Goodwill accounting and asymmetric timeliness of earnings", Review of Accounting and Finance, Vol. 12 No. 2, pp. 112-129.



Emerald Group Publishing Limited

Copyright © 2013, Emerald Group Publishing Limited

Related articles