Document Type

Thesis

Date of Award

2024

Degree Name

Master of Science (MS)

Department

Business

First Advisor

Nicholas E Wilson

Abstract

ASC 350-20 grants public business entities (PBEs) the discretion to determine timely recognition of goodwill impairment charges, which likely introduces managerial ambiguity in the goodwill impairment process. Consequently, this paper explores whether the ambiguity in goodwill accounting standards allows managers to engage in favorable financial reporting during economic disruption, such as the global financial crisis of 2008 and 2009 or the COVID-19 pandemic beginning in 2020. The study introduces an indicator variable to identify PBEs with highly elastic goodwill changes, providing insight into a PBE's internal processes and how its management practices for goodwill impairment differ from standard industry practices. We test our hypotheses through a sample of firms from 2003 – 2023 to evaluate if the indicator variable predicts goodwill impairment charges. Our evidence suggests that the procedural indistinctness ASC 350-20 allows did not exist during the global financial crisis; however, it is present during the COVID-19 years.

Subject Categories

Accounting

Keywords

ASC 350-20, COVID-19, FASB, Goodwill impairment, SFAS 142

Number of Pages

62

Publisher

University of South Dakota

Included in

Accounting Commons

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