Determinants of Goodwill Impairment Losses under IAS 36: The French Case

Abstract

The present paper investigates the determinants of goodwill impairment losses under IAS 36. More specifically, this study examines the impact of earnings management, corporate governance and financial crisis on goodwill impairment losses reported by French firms following the adoption of IAS 36 on purchased goodwill. Based on a sample of 730 observations from 107 groups of companies that belong to the SBF 250 over the period 2006-2012, the findings of this research confirm largely our predictions. Indeed, main results show that managers impair goodwill to meet earnings management motives linked to CEO change, earnings smoothing, big bath accounting and financial crisis. Moreover, they reveal that French firms impair goodwill to response to debt renegotiation hypothesis. In addition, the findings demonstrate that French firms audited by a Big Four auditor record lower goodwill impairment losses. Thus, they highlight the role of audit quality to constrain managerial opportunism associated to goodwill impairment.
This study illuminates the accounting standard-setters in understanding the determinants of goodwill impairment losses in France under IAS 36. Therefore, it contributes to the international actual debate on goodwill and to the international accounting literature.