Goodwill Impairment as a Reflection of Investment Opportunities

24 Pages Posted: 31 Jan 2009

See all articles by Jayne M. Godfrey

Jayne M. Godfrey

University of Auckland

Ping-Sheng Koh

ESSEC Business School

Date Written: 2008-05-08


We exploit a unique opportunity to examine whether goodwill impairment write-offs reflect firms investment opportunities during the first years of the US goodwill impairment accounting regime. We find that impairment write-offs are negatively associated with firms underlying investment opportunities. We also find associations between goodwill impairment write-offs and traditionally applied leverage, firm size and return on assets variables, although the leverage and firm size results are less robust. The results support the International Accounting Standards Board and Financial Accounting Standards Board contention that an impairment test regime can reflect firms underlying economic attributes, while simultaneously indicating that managers use discretion to reduce contracting costs.

Suggested Citation

Godfrey, Jayne M. and Koh, Ping-Sheng, Goodwill Impairment as a Reflection of Investment Opportunities (2008-05-08). Accounting & Finance, Vol. 49, Issue 1, pp. 117-140, March 2009, Available at SSRN: or

Jayne M. Godfrey (Contact Author)

University of Auckland ( email )

12 Grafton Road
Auckland, 1010
New Zealand

Ping-Sheng Koh

ESSEC Business School ( email )

5 Nepal Park
+65 6413 9737 (Phone)

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