The premium is found to be positively related to the performance of the bidder in the period prior to the bid. Entities that are regularly involved in the purchase and sale of unique intangible assets may have developed techniques for estimating their fair values indirectly. In some cases, expenditure is incurred to generate future economic benefits, but it does not result in the creation of an intangible asset that meets the recognition criteria in this Standard. However, this Standard applies to other intangible assets used such as computer software , and other expenditure incurred such as start-up costs , in extractive industries or by insurers. We analyze a comprehensive sample of nontaxable corporate stock-for-stock acquisitions occurring over the period 1990 through 1996.
We test the associations between bidder and target managerial ownership proxied by director's holdings , the prior performance of the bidder and target and the size of the premium paid to target shareholders. Together, these results suggest an endogenous relation between the firm's asset structure, its financing policy, and acquired goodwill. Antitakeover measures increase the bargaining position of target firms, but they do not prevent many transactions. This thesis investigates goodwill policy choice of Singapore listed firms. If the fair value of a revalued intangible asset can no longer be determined by reference to an active market, the carrying amount of the asset shall be its revalued amount at the date of the last revaluation by reference to the active market less any subsequent accumulated amortisation and any subsequent accumulated impairment losses. Lin and Peasnell, 2000a and 2000b provided empirical evidence that upward fixed asset revaluation decisions were used to reduce contracting costs, political costs and information asymmetry. Previous research has demonstrated that information asymmetry translates into higher transaction costs for trading shares of the firm which, in turn, raise the required rate of return and lower current stock price.
There may be both economic and legal factors influencing the useful life of an intangible asset. In some cases, an intangible asset may be acquired free of charge, or for nominal consideration, by way of a government grant. © Asian Academy of Management and Penerbit Universiti Sains Malaysia, 2011. This paper analyzes the format of typical bonus contracts, providing a more complete characterization of their accounting incentive effects than earlier studies. It explores the extent to which Australian listed entities complied with mandatory requirements in relation to impairment testing.
The frequency of revaluations depends on the volatility of the fair values of the intangible assets being revalued. In sum, our evidence suggests that acquiring firms structure acquisitions and expend significant resources to secure preferential accounting treatment in stock-for-stock acquisitions. This meant the goodwill amounts was inflated by omission of valuable intangible assets. Given the history of rapid changes in technology, computer software and many other intangible assets are susceptible to technological obsolescence. For example, in some jurisdictions, an active market may exist for freely transferable taxi licences, fishing licences or production quotas.
However, if only part of the cost of an intangible asset is recognised as an asset because the asset did not meet the criteria for recognition until part of the way through the process see paragraph 65 , the revaluation model may be applied to the whole of that asset. In these cases, the expenditure is recognised as an expense when it is incurred. The explanations and evidence have important implications for accounting regulators. Fifth, tax laws, legal restrictions on undistributed earnings and code-law institutional links between earnings and dividends reduce the timeliness of earnings, relative to dividends. Research and Development Expenditure 126. A residual value other than zero implies that an entity expects to dispose of the intangible asset before the end of its economic life. It provides evidence on the restrictive covenants and the accounting rules negotiated therein.
Examples of expenditures that are not part of the cost of an intangible asset are: a costs of introducing a new product or service including costs of advertising and promotional activities ; b costs of conducting business in a new location or with a new class of customer including costs of staff training ; and c administration and other general overhead costs. The same applies to the operating system of a computer. Past Expenses not to be Recognised as an Asset 71. The cost of such an intangible asset is measured at fair value unless a the exchange transaction lacks commercial substance or b the fair value of neither the asset received nor the asset given up is reliably measurable. We define quality as timeliness in incorporating economic income particularly economic losses. However, an active market cannot exist for brands, newspaper mastheads, music and film publishing rights, patents or trademarks, because each such asset is unique.
We use a two-stage, instrumental variables estimation method that explicitly allows for simultaneity in the choice of accounting method and acquisition premiums. Since each method of goodwill accounting as examined in this study has offsetting effects on different contracting costs, it is difficult to arrive at consistent predictions of accounting choice using conventional contracting cost hypotheses. We adopt an income strategy approach in operationalising our magnitude of writedowns construct to consider the set of accounting policies and negative accruals potentially available to managers. We included finance companies but excluded mining companies because the products and services offered by finance companies can be differentiated and, hence, there can be goodwill. This paper tests various arguments proposed to explain some of the sources of this premium.
I offer a more benign explanation and make some other observations about how this line of research could proceed in the future. This is because the development phase of a project is further advanced than the research phase. The agreement date for a business combination is the date that a substantive agreement between the combining parties is reached and, in the case of publicly listed entities, announced to the public. The primary source of data presented in the paper is a questionnaire completed by senior corporate managers of banks lending to listed Australian firms. The empirical tests reveal two systematic associations with accounting choice: size, a proxy for political visibility, and leverage, a proxy for contracting and monitoring costs of lending agreements. The factors that emerge affirm the thesis' model. Lev and Sougiannis 1996, p.