The Debate over Subsequent Accounting for Goodwill

What is it about?

We provide a comprehensive summary of the debate over subsequent accounting for goodwill, including the strengths and weaknesses of the existing impairment-only approach and the previous amortization-and-impairment approach. We also provide descriptive data on reported goodwill under these approaches and assess whether the data support the asserted strengths and weaknesses. Finally, we discuss alternative approaches suggested by standard setters to improve the existing methods, and empirically examine these alternatives. These are important questions, as the debate over subsequent accounting is unsettled due to the fact that there are significant informational flaws in the impairment-only and amortization-and-impairment approaches.

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