A review of research performed on the approach to the subsequent measurement of goodwill

Abstract

Orientation: By taking stock of goodwill accounting literature, the article identifies key themes and highlights the lack of innovation in goodwill and intangibles’ accounting evolution. Research purpose: This article suggests pure grounded theory research is required to develop a novel perspective on goodwill accounting. Motivation for the study: Little progress has been made to overcome the dated issues related to goodwill impairment necessitating a genuinely fresh approach. Research approach/design and method: A search was performed on the Scopus Database and all sources containing a combination of ‘goodwill’ and ‘impairment’, ‘amortisation’ or ‘depreciation’ in the title, abstract or keywords were extracted. A total of 231 sources from 1990 to 2022 are analysed. These are coded with the support of a content analysis and a bibliometric analysis. Main findings: This research identifies the dominance of positivist quantitative research and financial economics as a key issue that may be holding back progress on the subsequent treatment of goodwill. The research iterates three core issues, namely: (1) that the impairment-only approach allows too much managerial discretion, (2) an inability to reasonably estimate the useful life of goodwill deters many from supporting goodwill amortisation and (3) sometimes goodwill may be a wasting asset while others may genuinely have an indefinite useful life. Practical/managerial implications: This research may be relevant for standard setters when considering goodwill accounting methods. Contribution/value-add: The research provides insights into existing literature and highlights areas for future accounting research.

Keywords

• agency theory
• amortisation
• depreciation
• goodwill
• impairment
• value relevance