A Non-Parametric Approach in Measuring the Variances of Compliance Levels of Goodwill Impairment Testing

Abstract

The aim of this study is to contemplate the degree to which Singaporean firms comply with the highly technical disclosure requirements under FRS 36 specific to goodwill impairment testing. Singapore is chosen because of its advanced and economically significant economy in the heart of Asia, with a highly skilled professional workforce and strong institutional and financial infrastructure to support quality financial reporting. This research examined large listed firms reporting goodwill in three consecutive years, to establish compliance levels and disclosure quality post-transition. The study found that there was a slight improvement in the rate of compliance with accounting requirements over the investigation period. A significant Friedman test implies that the change was significant and the development is statistically significant. Findings indicated that compliance levels and disclosure quality, although better than prior studies would have suggested, are still sporadic and unpredictable. However, the overall results of the analysis in this study suggest that in the majority of cases the levels of compliance and disclosure quality among the Singaporean listed firms are low. This is particularly so for the cash-generating unit definition and goodwill allocation, and key input variables employed in estimating recoverable amounts of cash generating units (especially on discount rates selection). Based on these results, the majority of Singaporean firms face a high degree of difficulty in the translation from idea to action in implementing the requirements of the standard. Further, questions are raised about the quality of accounting information among goodwill-intensive firms in Singapore and the robustness of regulatory oversight institutions operating within Singapore.

Keywords

• impairment testing
• frs 36
• financial reporting
• singapore