Goodwill

Abstract

The New Economy is a new arena in business life where IT (Information Technology) companies act. The IT sector in Sweden grew immensely during the end of the 1990s. That growth was possible through numerous acquisitions. The market's valuations of the new prosperous enterprises in this young sector were extremely high. Through a row of highly priced acquisitions, huge goodwill items emerged in most IT companies. Profitability was not a core issue and the future seemed bright to most actors. Share prices fell dramatically during 2000 and IT companies had to write down goodwill in a drastic way in the annual reports. In this thesis different aspects of accounting for goodwill in the annual reports covering the year 2000 for 29 Swedish IT and Internet companies are presented. A close-up on two companies, HiQ and TietoEnator, provides a deeper insight in our study. Different concepts of goodwill are looked into. Accounting rules and regulations dealing with goodwill in specific and with intangibles in general are presented both from a national and an international outlook.