Goodwill impairments, a delayed or ignored - A study investigating if goodwill impairments within Swedish firms are delayed by three years

Abstract

How to treat goodwill within firms, has always been a discussion of great relevance. New standards were introduced to Swedish listed firms in 2005, whereby goodwill should be tested annually for impairments and no longer amortized on annual basis. Since the economic recession in 2008 Swedish firms have made less goodwill impairments than what is reasonable to expect, which has resulted in experts believing that goodwill impairment can be delayed by three to four years from when the real asset loss occurs. Therefore the purpose of this study is to investigate if a three year time lag exists or not, which is examined by our regression model. The study also tests for differences in goodwill impairments between the four industries included in the research. From our test, we cannot statistically show that a relation between goodwill impairment and market capitalization exists with a three years time lag. The tests also establish that different firms treat goodwill differently.